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 (^DJI 0.31%) and broad-based S&P 500 (^GSPC +0.29%) 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 (BA 0.72%), 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.
