On the Fed and WFP

Bruce Krasting's picture

The most disappointing element of Friday's NFP report was the drop in Work Force Participation (WFP). This important measure of the labor force fell to a 31 year low. A look at the details shows things are even worse than the headline report. Consider this chart of WFP for two groups; workers 22-55 (white) and those 55+ (brown). The lines crossed in 2002. The negative gap has widened every year. It's fallen off the chart the past three years.



This chart describes a real crisis for America. The long term consequences to the economic health of the country are tied up in this chart. All long-term macro economic analysis of the USA assumes that the current crop of younger workers will evolve to be a productive group for the rest of their lives.

The hope belief is that the younger members of the sub 55 group will have babies and buy houses. As they prosper, GDP will grow, tax revenues will rise. The younger workers of today have a very big burden on them. In future years they must generate tax revenue for Washington as D.C. has made very big promises on Social Security and Medicare that can't be met unless this crop of workers succeeds.

There is not a chance in hell that younger workers are going to prosper looking at this chart. As a result, future tax revenues will be less than planned. The economy will lag well below potential. Ultimately, the lines will cross; major cutbacks in entitlement spending will have to follow. This outcome is written in stone unless the trajectory of younger employment changes.

What to do about this problem? I don't think there is an easy answer.

One solution to the lack of upward mobility for those 55 and under would be to get more of the 55+ folks out of the workforce. The exact opposite is happening. Older workers are putting off retirement in droves. They have to. Their primary nest egg, their home, has turned into a liability. They are too old to invest all of their money in stocks, and there is no income to be had in a world of perpetual ZIRP. So they continue to work.

Lowering the minimum retirement age from 62 to 60 would change the direction of the lines. I advocate this, but the problem is that early retirement means lower Social Security monthly checks. I doubt that many could afford to retire on the meager income that SS would pay at age 60.

As a policy matter, the country is going in exactly the opposite direction. Republicans, Democrats, the Fiscal Commission and even the AARP have all been pushing for an increase in the retirement age. This may be necessary to "Save SS as We Know It", but more older workers means less opportunity for younger ones.

The only real solution is to magically make the economy grow. The rising tide would lift all the boats. But the country has been pushing the string on efforts to stimulate the economy for the past decade. Those efforts have not worked.

This takes us to Ben Bernanke and what he and his cohorts will decide to do next week. The betting is that Ben is going to act. One thing that Ben is likely to do is extend the ZIRP language for another year or two. Bernanke believes that a promise to keep interest rates pegged at zero until the latter part of the decade is what's needed.

Over the next four years over 10Mn people (and their spouses) will reach retirement age. Many of those people will have this conversation:

Honey, we've saved some money for this day, but sadly we can't get any return on what we saved, so we have to put off retirement, and work for another two years or more. Sorry.

How many people will say this and act accordingly? 20% sound about right? That's two million jobs that the sub 55 group will not get. The lines on the chart will get wider and wider and the future will get dimmer and dimmer.

One could not find an economist (of any stripe) who would not agree that the trends represented in the chart constitute a serious long-term threat.

Over the past few months Bernanke has made comments regarding the risks of sustained ultra-low interest rates. He has done a poor good job of informing us as to what those risks are, and what are their consequences. I've attempted to describe one of those risk here. I'm convinced that the +/- 55 WFP chart will deteriorate further in the next few years. Perpetual ZIRP will contribute to this very negative trend.

Bernanke knows this. I wish he would admit to it.






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steve from virginia's picture


The government will borrow the money to pay Social Security checks like it borrows the money for everything else.


Taxpayers are irrelevant. As long as Saudi Arabia accepts dollars, there is no problem with government spending.


The US is credit supplier to the world.

Henry Hub's picture

Enough of this bull shit. The oldies are screwing the young ones, the poor is taking advantage of the middle class, the black are scamming the whites, on and on.

Until the goods and the services consumed in this country are produced in this country there is no solution.

I'm going to use a word effectively baned in the MSM and not even seen on ZH. The T word: Tariffs.

If Apple, for example, wants to make the iPhone, iPad, whatever, in Asia that fine. But if you want to sell in the USA you pay a heave tariff on the product. You have to force companies to return the jobs to this country.

Free trade is the biggest of THE BIG LIEs perpetrated on the American people. The reason this country, in the early days, became the economic powerhouse it did is because American industry was protected by tariffs, a little acknowledged fact.

There's a solution but it's a solution the multinational corporations don't want discussed.

dogfish's picture

I am 56 years old and i feel bad for what my generation has left for the new generation.I always thought that i was voting for the most responsable person but it never works out that way,as you will learn.Good luck we will all need some.

Savyindallas's picture

Free sex, drugs and rock n roll   -wars and deficits and letting the Wall Street banksters loot and pillage - - the baby boomers will be the death of america - I hope they live long enough for their children to take their revenge

sodbuster's picture

Through ZIRP, Ben steals more money from people in a week, than Bernie Maddof did his whole career. Ben, may you and your NWO traitors, rot in hell.

FleaMarketPete's picture

The impending generational wars are at hand.  I'm young.  I can easily move to a different country.  You think I'm going to live a life of serfdom just so the baby boomers can live out their lives of excess.  Life is for the young, not for the old, and fuck you if you think I'm going to pay your comeuppance.

Shankopotomus's picture

 I got news for ya. I don't need anything you've got for no reason, so go screw/ fuck yourself. Take your pick.

FleaMarketPete's picture

I don't know what your hard on is for me, but if you are NOT expecting 30 years of retirement living off the tax payers then good for you.  For real, if you were responsible and saved for retirement responsibly and not expecting to have your ass subsidized by SS, Medicare, or the AARP then BRAVO.  You are the man.

But if that's not the case and you wasted your life thinking that all hard work has a universal value and that your children own you 100 times the amount of SS and Medicare than you paid in, then you better learn a valuable skill.  Your generation has run this country into the ground and there just won't be enough to go around for the expiring generation.

Like I said, I am young and the guard is changing.  My generation is suffering more than any generation since the great depression and all we hear are the self-centered, douche bag baby boomers demanding more government subsidized retirements.  Your generation will soon be in the minority and it will not end well for you.

Cosimo de Medici's picture

If the generational wars are at hand, and you are representative of the opposition, then this is going to be easier than Grenada.

Cowboy up big fella and go try to make it in a foreign country.  Yea, it's just so much easier everywhere else, and undoubtedly their national goal---nay, their societal dream---is to have someone like you show up.  Yep, you'll probably singlehandedly juice their GDP by 5%, then get your mug on a postage stamp.  Try China.  They're really sympathetic to young people who think life owes them something. 

By the way, in what country did Mark Zuckerberg---love him or hate him---make it big?  Methinks he did not spend his youth whining about the bad deal life handed him.

FleaMarketPete's picture

Fine I will just stay here and vote to cut your SS and Medicare.  If I can't vote for it, then maybe I will just take it from you.  Old age is a bitch.

The baby boomers are on their way out and I am the future.  Do you like the taste of cat food?  Or maybe you can wash my car.  Your generation has destroyed this country and the consequences will be forced upon you.

Vidar's picture

The younger generation is wising up to the scam perpetrated on them by Washington.

We refuse to bear the burden of unsustainable promises made by politicians only interested in the next election.

The past 40 years have been all about shifting economic benefits forward and shifting cost into the future.

The generation that consumed all of these benefits now expects those onto whom they have shifted the cost to pay the bill, but it's not going to happen.

I will work just enough to survive, as will many of the most intelligent members of the under 35 group.

I refuse to contribute to a system that is doomed to fail.

The younger generation is the Atlas that the baby boomers have placed the weight of their excesses upon, and we are shrugging.

strateshooter's picture

old news...you say this WILL happen.Wrong.It IS happening right now.

I am 59 and have delayed retirement exactly becasue of the reason above.

The FED abd the BoE are crucifying a generation of young people to save their precious fucking corrupt banking system.Our politicians are allowing it becasue they are too weak to deal with the reality of admitting their collusion  and the implications of a major collapse.

Its a  historical mistake that will eventually lead to massive political upheaval in the West.

The Banks should be nationalized.

Their managements sjhould be interned, interviewed , processed and imprisoned.

Shareholders need to wiped out  and the Banks re-cap'ed with public money.

HPs should be allowed to fall until they affordable to young people.


Our politicians need to protect us from an asset stripping financial oligarchy.If they do not the people eventually will.


All revolutios start with a sense by folks  that 'Something Ain't Right'.


That sense is nnow widespread.We know...and we exactly what ain't right.And our pols better get on the case quick and stop fucking around.They are inviting chaos.

StychoKiller's picture

Every time I follow up on my question, "Still take FRNs?" with:  "Someday the answer will be no!"; I have yet to hear anyone disagree.

jim249's picture

I am one of those people that is stuck still working. Interest rates are so low that my goals are not going to be met at my planned retirement aqe. This is going to force me to work longer and save even more which cuts into my discretionary spending. No more eating out, concerts etc. The last place I wouild put my $ now would be in the stock market. No one knows but Ben when the Fed is going to pull the rug out and the whole freakin mess comes crashing down. I don't think this guy even cares or he doesn't have a clue as to what he is doing!

Fecklesslackey's picture

And here we are sitting around and worrying about tax increases on 250,000 salaries, tax cuts for everyone, reduction of Medicare increase and a thousand other trivia when all about us the house is burning

James's picture

El GORDO SPOUTS-all that is required is to toss the older folks into the recycling bin.  Easy.


Tell 'ya what El Gordo, You grab yourself a can of Sweet Tea and a big bag of Skittles and come on down to Florida and we'll talk. 'kay?


El Gordo's picture

What do you think Obamacare is all about?  Those over 55 and those at retirement age will be sent to the cracker factory to make room for the newer generation, thus reducing medical costs, social security costs, and increasing tax revenues to our rich uncle.  Obamacare is the solution to all the problems facing this nation today, and all that is required is to toss the older folks into the recycling bin.  Easy.

mc888's picture

Soylent Green is people!

Fox-Scully's picture

I believe it is Solyndra Green Shoots is people!

Ned Zeppelin's picture

Lots of knuckleheads on tonight.

DeltaDawn's picture

Tyler,thank you so much for the perspectives and information provided. My suggestion would be that your writers and audience began to focus on solutions and actions. It is an extremely precarious position we face, but it would be an interesting exercise to see if we could come up with any good plans (sarcasm and fantasy not allowed). Our politicians are not putting anything on the table. We should brainstorm a collective plan even if it appears all the exit ramps have been passed.

StychoKiller's picture

Solution space is squareroot( -1 ), capiche?

Meesohaawnee's picture

"the betting is the Fed is gonna act"sorry not gonna happen. obvious political move if they did. Fed needs to stay out. If they did and i were romney id blow a gasket. Then again, if romney really did say hed end Ben then the QE would just be seen as saving his job.Simply too close to the election. Id even go out on the limb and say MAYBE after the election they quit levitating this fraud. Too much on the line in the future. If they keep doing it they might as well just go 2 hour days at the NYSE,,etc

trebuchet's picture

Great article. 

pain_and_soros's picture

You forgot to mention that the kids of those 50 somethings will be living at home since they can't support themselves, so mom & pop will have to work more & longer to support their kids...

I'm sure it will be all be just one big happy family...

sangell's picture

I've thought about this problem too and it is a big one. If a person doesn't get their first serious job until they are 25 or 30 then some of the most creative and productive years in their life are lost... forever. In my case the big constraint on my retiring early was not Social Security eligibility but keeping my healthcare plan. I needed 10 years with my municipal employer to keep it after I retired. On my tenth anniversary I gave them my notice.

Finding some way for those between 55 and 65 to either retain their employer provided health care plans or get medicare coverage might enable many, who would like to retire to do so more than lowering the Social Security age. I would imagine the cost of a private healthcare insurance plan would easily exceed my full benefit social security check.

guidoamm's picture

"Finding some way for those between 55 and 65 to either retain their employer provided health care plans or get medicare coverage... "

Or reduce the costs of healthcare by reducing deficit spending and public debt... ... ... and returning to a sound monetary system... 

But that's not going to happen in our lifetimes...

dolph9's picture

I have said it before, I'll say it again:

If you are an American citizen and you must punch an alarm clock in the morning and get to work to sustain yourself or your family, you are a serf.  You are a serf in a bloated, dysfunctional, corrupt, dying Empire whose only roles are to ensure that oil flows from the Middle East, that Israel is protected, and that a few bankers and corporate henchmen get obscenely rich.

I'm a serf but at least I recognize it, and I no longer give my consent to the system.

Bringin It's picture

Nice Dolph.  Be a farmer, not a serf.

fonzannoon's picture

Bruce you pointed out that we need to "magically" grow our way out, and concluded that current efforts are not working. Then you skipped to Bernanke, who we all know is having zero positive impact on growth. So, any prescriptions from you to achieve growth?

Popo's picture

We desperately need to contract. The belief that growth can be created via policy is the entire problem.

Furthermore, when the banks are leveraged at 80:1 "growth" just makes them richer and you relatively poorer as you can't play with leverage like they can.

But contraction destroys them and punishes their foolishness very effectively.

The question is: How can we *achieve* contraction?

StychoKiller's picture

Mathematics and exponential functions will bring on The Great Implosion™, just a matter of time now...

FleaMarketPete's picture

What about the drop off in consumption by pushing baby boomers into earlier retirement and deflationary effects as they accelerate asset sales to help pad their (lack of) savings?

Either way, I think we should tie SS and Medicare to some type of community or charitable service work requirement.  You've already left me with a much lower standard of living so you're not just going to sit on your ass or the golf course while my wife and I live in a shithole apartment and worry if we can afford having a kid.

Cosimo de Medici's picture

I'm curious as to what standard of living you think you and your wife are entitled to simply by doing us the apparent favor of coming into existence in this world? I wonder why you believe you are entitled merely by birth to a better deal than some female born in rural Bangladesh?

We're all dealt a hand. Play the one you got dealt and stop whining. Your lot in life in nobody's fault but your own. If you don't like it, you and wifey can haul your sorry asses off to Cox's Bazaar.  Finally, if you cannot afford a kid, too friggin bad.  It's not like the planet is screaming for more of your gene pool.

Shankopotomus's picture

I was on the local volunteer fire department from age 22 until 47. Does that count as my community service requirement to recieve my S.S. and Medicare you little whinning snot nosed asshole?

FleaMarketPete's picture

Seriously?  A 25 year tax payer funded pension just because you were a volunteer fire fighter?  The younger generation cannot withstand the outrageous entitlement of your disgusting generation.  You've lead your children into despotism and you have the fucking nerve to cite a volunteer fire department?   The generational wars are coming you asshole and it will be bad for the under 50 crowd, but it will be absolutely merciless for you boomers.

FleaMarketPete's picture

You are so derranaged.  Look at the economy you have left our generation.  And you think we are going to take on 2 and 3 jobs just so you can live in retirement for 30 years.  You have no idea what's coming....

printmemoney's picture

You also voted for the generation of politicians that traded your ss fund for worthless tbills so whether you think your volunteer fire service entitles you to your benefits or not.....you'll be sucking on an empty fire hose when the collapse comes........except you'll be old

Shankopotomus's picture

I didn't do it so I thought I would be entitled to anything let alone S.S. I did it for one reason and one reason only. To give back something to the community I live in. Try it some time (if you aren't already, I wouldn't know) you may like the feeling you get from doing it.  

bilejones's picture

The 30 year long explosion of debt across all sectors of the economy, Govt. student loan, mortgage and others all have a single effect in common: They borrow consumption from the future.

Well this is now the future .


The over-consumption of the past will have to be repaid by under-consumption now, or, as it's also known, people are poor now.

FleaMarketPete's picture

When worried baby boomers ask me about the recovery and the future of the economy, I generally tell them to learn a valuable skill such as cooking and cleaning or tailoring, something that will make them stand out on the black market.

WTFx10's picture

You pay for your shitty apartment with your wife by giving advice to baby-boomers who  you hate so much?

I see your wife learns her a skill (prostitution) and fucks one of those baby boomer clients gets pregnant and you end up thinking its yours .You end up supporting the rug rat until it leaves the shitty apartment.


kaiserhoff's picture

cough, snort,, Pot,,Moon,,,sHINe,,,,;

Who's gonna put someone's granny in the slammer for practicing family traditions?:)

Or they could do the Sleaze Beach arbitrage, and trade their pain pills to the young.  Sad but true.

     By the way, Pete, my flea needs are pretty well met.  What's the going rate in your neck of the woods?????  ;)



kaiserhoff's picture

Good call Bruce, but it's even worse.  The jobs the youngins can get are mostly part-time, low wage, rat shit joke jobs.  It's simply irresponsible for a young person to take a real job in the productive sector.  They will be much better off, for now, as kleptocrats or corporate pill pushers, and of course, that way lies death for the real economy.

The only thing that will begin to correct this is free markets.  Arrest traitor Ben!

AurorusBorealus's picture

Why work... your local County Assistance Office (or whatever the branch chapter is called in your community) is one-stop shopping for "magic" card that will solve all your problems... free or very low-cost housing, free cash, additional free cash for food expenses, free health-care, free money for home-heating.   What $9 - $10 job is going to offer all of this?  After you have finished shopping for benefits from your local County Assistance Office, swing by the Social Security Administration nearest you and take a look at SSI benefits... $500 and the right attorney and you can have more free money.  The bottom line is this... wages must rise at lowest end in order to compete with public assistance.

ClassicalLib17's picture

Law firms in Illinois advertise their services on T.V. to help you get your SSI benefits.  A friend(58 years old) got his through one of those law firms by pleading short term memory loss.  Me?  I was a union carpenter for 35 years and have been debt free now for the last 9 years. I own a duplex of which my 91 year old mother shares half at the same 350 dollars a month rent she paid the previous landlord back in '86 when I bought it.  I don't get any tax breaks for this kindness and I now earn 1/3 of what I used to take home.  I got laid off in January 2010.  I did, however, make hay while the sun shined when I was still working at my craft and bought 1300 lbs of lead and jacketed with the necessary amount of powder and primers to reload in my Dillon 650.  P.S.  I was looking forward to being one of those 99ers while I was laid off, but I ran for a local elected office and won which required me to end my UC benefits after collecting for only 56 weeks.   I've been such a fool 

kaiserhoff's picture

Or public assistance must fall.

Headline from the local paper - OBAMA TAKES AIM AT THE MIDDLE CLASS

Somehow, I never doubted that.


Fecklesslackey's picture

I heard him say on Thursday he was going to save the Middle Class ... What gives