If you’re a news junkie like me, you’ve likely seen the latest report about LinkedIn…
The career-focused social media company is laying off nearly 700 people.
LinkedIn previously cut about 700 positions in May. So that’s around 1,400 layoffs this year.
These moves shouldn’t surprise you…
After all, Microsoft (MSFT) owns LinkedIn. The software giant laid off more than 10,000 people in the first quarter of this year. Then, it slashed even more jobs over the summer.
You’ve likely seen news of other tech layoffs, too. Amazon (AMZN), Google parent Alphabet (GOOGL), and Facebook owner Meta Platforms (META) have all reduced their staffs in 2023.
Despite these cuts, U.S. unemployment remains stubbornly low…
It was at 3.8% in September, according to the U.S. Bureau of Labor Statistics (“BLS”). That’s near the lowest level since the late 1960s. (The next update is November 3.)
And yet… it sure feels like nobody wants to work anymore.
Sure, tech workers are dealing with layoffs. But you’ve likely also seen a lot of “now hiring” signs in your area. Finding someone to make a cup of coffee or a burger is a big challenge today.
That’s the part we see. But the labor shortage is happening in many areas of the economy.
The problem is simple…
The low “official” unemployment rate from the BLS is masking the truth. By only focusing on this number, it’s hard to see what’s really going on in the U.S. labor market.
So today, let’s take that mask off…
The average U.S. unemployment rate over the long term is 5.7%. That’s a big jump from the current level.
But we’re still hearing the “nobody wants to work anymore” narrative. And as it turns out, the data supports that narrative…
The following chart shows the “employment-population ratio.”
This ratio tracks what the BLS describes as the “working-age population.” And today, it reveals what we’ve all sensed – a lower percentage of working-age Americans with jobs.
Take a look…
In short, this ratio has recovered from the depths of the COVID-19 pandemic. But the percentage of working adults is still below 2019. And it’s dramatically lower than 2007.
The Organization for Economic Cooperation and Development tracks a similar number called the “labor-force participation rate.”
In the U.S., the labor-force participation rate peaked at about 80% in 1997. Over the past 26 years, it has fallen to around 78%.
That might sound like a small change. But when you consider that the U.S. working-age population is roughly 105 million, it’s clearer that we’re talking about a big shift.
It’s even more concerning when we look elsewhere. Take the rest of the G7 countries, for example…
The G7 is full of the world’s biggest industrial nations. The other members are Canada, France, Germany, Italy, Japan, and the United Kingdom.
The G7’s labor-force participation rate has been increasing since the 1990s. And today, as a whole, it’s beating the U.S.
Folks, this is a real problem…
Sure, the COVID-19 pandemic disrupted our labor market. But we can’t blame it for all our woes. It just revealed a trend that the U.S. had struggled with for more than a decade…
Falling labor-force participation rates.
Tech layoffs might be grabbing the headlines today. But over the long term, we’ll likely see a competitive labor market. That’s true even if a potential recession generates more layoffs.
Put simply, the U.S. has more available jobs than it has working Americans.
So if you’ve felt like nobody wants to work anymore… you’re right.
As a result, we can expect serious competition in America’s labor market for years to come.
Good investing,
Vic Lederman
