8 Incredible and Alarming Labor Force Statistics

More than four years removed from the deepest recession the U.S. witnessed since the Great Depression, many investors are finally beginning to see the proverbial light at the end of the tunnel. The U.S. unemployment rate hit a four-and-a-half-year low in April of just 7.5%, while the housing market continues to find solid footing with regard to both housing starts and rising home prices. If I didn't know any better, I'd call this a slow but steady recovery of the U.S. economy.

But a deeper dive into the condition of the labor force reveals stark dissimilarities between the economic data we've been seeing and what's really happening. It's been my postulation for weeks that there's a large dissociation between labor participation, wages, and satisfaction, and the economic data we've been delivered could be a worrisome sign of things to come for the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and broad-based S&P 500 (SNPINDEX: ^GSPC  ) which both eclipsed all-time highs earlier this year.

Here are eight incredible, depressing, and alarming labor force statistics that certainly have me thinking twice about the market's ability to keep heading higher.

70% of the full-time labor force is "not engaged"
According to a Gallup poll of full-time workers conducted between 2010 and 2012, of the roughly 100 million in the labor force, only 30 million are considered engaged with their job. The remaining 70% are considered "not engaged," or apathetic, toward their job, while 18%, or 18 million, full-time employees are actively disengaged from their employer and potentially looking to undermine their company. These disengaged workers are responsible for costing U.S. businesses upward of half a trillion dollars each year. 

Duration of unemployment has more than doubled in five years to 37 weeks
The average length of time it takes to find a job has risen dramatically in just the past five years. In May 2008, it took an unemployed worker 16.6 weeks to find employment. Last month, that figure stood at 36.9 weeks. Amazingly enough, that's down from a high of 40.7 weeks set in December 2011. Unemployment levels may be falling, but finding a job, based on these figures, is still very difficult.

U.S. real hourly earnings have risen by a grand total of 2% -- in the past 33 years!
An easy way to create a disgruntled labor force is to make it difficult for workers to pay for the things they need. Since 1980, nominal hourly wages for U.S. workers have risen by 205.6%. On the surface, it would appear that employees are enjoying the benefits of increased productivity. However, when adjusted for inflation, real wages for U.S. workers have grown an abysmal 2.1% since January 1980. Meanwhile, many costs, including health care and gasoline, have increased by much more than 2% in real terms over the same period. 

Health care benefits account for approximately 20% of workers' compensation
If you're curious where workers' real wage raises have gone, look no further than the health care sector. In the 1960s, health care expenses accounted for less than 10% of workers' compensation. By 2011, that figure had jumped to just shy of 20%. What's more distressing is that health care costs as a percentage of compensation could potentially soar for some middle-class Americans with the upcoming implementation of the Patient Protection and Affordable Care Act. No longer able to get by with a bare-bones health plan, many middle-class Americans could see up to a triple-digit spike in their health care premiums.

The labor force participation rate hit a 34-year low of 63.3% in April
The cumulative labor force participation rate -- essentially a measure of the current labor force as compared to the number of adults within the same age range -- has been on a steady decline since 2000.

Source: Bureau of Labor Statistics.

Certainly, the rising number of Americans entering retirement, going to college, and collecting Social Security disability has caused a drop in the labor force participation rate. However, there's little denying that nonexistent real wage growth and an average unemployment period of almost three-quarters of a year are discouraging factors that have caused workers to simply give up trying to find a job.

Labor union membership hit a 97-year low of 11.3% last year
According to the Bureau of Labor Statistics, union membership declined by 400,000 last year to just 14.3 million members. Tougher anti-union laws in Wisconsin and Indiana, as well as corporate expansion into non-union states, were blamed for much of the decline. Boeing (NYSE: BA  ) , for instance, has been expanding its production in South Carolina, and last month it announced plans to shift its engineering work to the Palmetto State and to Long Beach, Calif. -- both non-union sites. If this trend continues, any bargaining power labor unions possess may soon disappear.

Less than a third of workers are satisfied with their pay and their jobs' stress level
Based on a Gallup poll on U.S. employee satisfaction conducted in August of last year, only 30% of respondents claimed to be completely satisfied with their pay, while just 29% were completely satisfied with their jobs' stress level. On the opposite end of the spectrum, 28% said they were completely dissatisfied with their pay, and 33% reported being completely dissatisfied with the stress level of their job. This reinforces the notion that as productivity growth outpaces wage growth, the labor force is growing more stressed.

Currently at 57.3%, women's labor force participation rate has been declining since 2000
Having grown throughout the 20th century, women's participation in the labor force simply stopped growing in 2000 and has even been on the decline over the past decade.


Source: St. Louis Federal Reserve.

Partly to blame are restrictive labor laws that can make it difficult for a working mother to raise a family. Many other developed nations offer a longer maternity leave period than the U.S., and more than half of other developed countries have passed legislation prohibiting discrimination against part-time workers -- something that doesn't exist in the U.S. A slumping female labor participation rate is also particularly worrisome because more women than men are now obtaining college degrees, according to the U.S. Census Bureau.

The takeaway
We may be witnessing bits and pieces of the economy improving, but make no mistake about it: The labor force appears to be in pretty dismal shape. Workers are the root of ingenuity and innovation; without their desire to outperform, as well as a pay structure that outpaces inflation, corporations don't have much hope of delivering meaningful top- or bottom-line growth. These eight depressing statistics should give investors plenty of reason to be skeptical of what could really be wrong with the Dow Jones Industrial Average and S&P 500 at these levels -- and they certainly shouldn't be taken lightly.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery" outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


Read/Post Comments (12) | Recommend This Article (16)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2013, at 8:30 PM, OceanJackson wrote:

    I'm perplexed why you think %70 of workers being "disengaged" is worrisome. Firstly lets get real - jobs aren't tailored to us, we must change who we are to fit them. If everyone had a job of their dreams, there would be zero large corporations. Thats simple logic. Corporate politics makes us put on smiling, lying faces, "yes, I like my job." No, we don't. But we're adults and we need money. We need whatever crap job we can get, much more than it needs us. This is just plain ol' Capitalism. So, it's not as if people are going to stop doing there jobs, or as if companies won't generate more value out of their employees than they pay them. There's nothing to be worried about. If anything, I'm shocked the percentage isn't higher, and I'd say in reality it is- I'd bet my entire net worth that a huge chunk of those saying they are "engaged" in their job, are lying, to at least themselves.

  • Report this Comment On June 27, 2013, at 1:35 AM, VicRep100 wrote:

    I have been reading that a lot of municipalities are in trouble because the unions have so much political power that they can't control their pension costs

  • Report this Comment On June 27, 2013, at 10:34 AM, Schneidku40 wrote:

    VicRep100, and the funny thing is that city workers are the absolute LAST people that would ever need a union. It's astounding. States are having the same problem and it's the same ordeal. There is no reason to have Unions at any government level.

    I've seen the hourly earnings vs. inflation statistic in quite a number of articles, and I don't like it. Inflation is directly tied to earnings. If people have more to spend, companies can charge more for their product and they will. Real earnings can basically never outpace inflation in any significant way.

    I was surprised to see the women's participation rate is declining. I had thought it was still increasing.

    I've said it time and again, and I know many other people have said it time and again also- a certain portion of the increasing average length of unemployment is due to the increased length of time people can draw unemployment benefits. Every time the government creates or increased a benefit, they increase the "need" for that benefit. My father's tire shop has had a job posting for months and has had 0 applicants.

  • Report this Comment On June 29, 2013, at 1:09 PM, Borealis55 wrote:

    Many good points in this article. When you couple it with the fact that 47.5 million people in 23 million American households receive Supplementary Nutrition Assistance Program (SNAP) benefits to spend at their local grocery (the bread lines of today), it paints a fairly scary picture. (stats from USDA Food & Nutrition Service)

  • Report this Comment On June 29, 2013, at 1:22 PM, devoish wrote:

    Sen. Elizabeth Warren (D-Mass.) made a case for increasing the minimum wage last week during a Senate Committee on Health, Education, Labor and Pensions hearing, in which she cited a study that suggested the federal minimum wage would have stood at nearly $22 an hour today if it had kept up with increased rates in worker productivity.

    "If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour," she said, speaking to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage. "So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn't go to the worker."

    Dube went on to note that if minimum wage incomes had grown over that period at the same pace as it had for the top 1 percent of income earners, the minimum wage would actually be closer to $33 an hour than the current $7.25.

    Best wishes,

    Steven

  • Report this Comment On June 29, 2013, at 1:40 PM, earlyseller wrote:

    OceanJackson, I am glad I am now retired as there is no way most people would endure your negative attitude today if they were unfortunate to work with or for you. I like working for a commodity trading company back in the 1980s and did all I could to get promoted away from an obnoxious co-worker., Fortunately I was successful and "he eventually died and the hogs ate him" too.

    Life sux if you let it and many of my friends don't let it.

  • Report this Comment On June 29, 2013, at 2:49 PM, xetn wrote:

    The stats detailed in this article have been around for at least a year if not longer, so I am surprised that TMF have just "stumbled" on them.

    As for the comment about the minimum wage (which should be renamed to the guaranteed lower employment law) puts many people out of work due to lack of experience or rules regarding education.

    A $33.00 minimum wage would probable put another 30% out of a job. Can you imagine a Starbucks paying $33.00 to some college grad for serving up coffee? Insane!

    As for accepting "just any old crap job" don't do it. If you are "above" that just start your own company and get a feel for the "other side". Nobody forces you to take any job; just look at all the people standing on corners with their hands out, while many hamburger joints have help-wanted ads.

  • Report this Comment On June 29, 2013, at 4:59 PM, ershler wrote:

    xetn,

    I think the whole point of Senator Warren's comment is to highlight the increasing concentration of wealth in America.

  • Report this Comment On June 29, 2013, at 6:14 PM, wjcoffman wrote:

    "If people have more to spend, companies can charge more for their product and they will. Real earnings can basically never outpace inflation in any significant way."

    EXACTLY! Put another person to work to increase your income and theoretically enable "the good life" and you find - at least middle/lower class anyway - you're still just barely keeping up. (I don't know why I clarified middle/lower class - upper class doesn't work to bring home more money to enable "the good life".)

  • Report this Comment On June 29, 2013, at 11:17 PM, ExecProducer wrote:

    Sen Warren (known as Pocahontas in Mass due to her claim to be 1/32 Indian) is clueless about the business world - she has no experience in it having been a lifelong academician.

    Her levels of the minimum wage would immediately destroy about half the service businesses in the country (if not more) Hard to believe anyone takes here seriously- even harder to believe she was elected. Then again, in Mass, they would elect a corpse if it was a Democrat.

  • Report this Comment On June 30, 2013, at 8:38 PM, FarmBoy64 wrote:

    Hi Sean,

    I'm not sure that lower labor union membership is entirely a bad thing. It is a broad generalization, but I bet in many cases that non-union labor is more productive at a lower cost per hour, so at a macro economic level that should help hiring and economic growth. I think I would argue that a somewhat lower pay scale results in a higher level of employment overall. I think that is preferable to higher wages and fewer jobs. As a side note, I would add that if employees felt that union membership was truly valuable, we would not be seeing a historical decline in the number of union members.

    Thanks for the article!

  • Report this Comment On July 01, 2013, at 5:24 AM, devoish wrote:

    "but I bet in many cases that non-union labor is more productive at a lower cost per hour... I think I would argue that a somewhat lower pay scale results in a higher level of employment overall" -FarmBoy64

    Or to put it another way -

    "The labor force appears to be in pretty dismal shape." - Sean Williams

    Best wishes,

    Steven

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