Here's The Truth About The Massive, Million Plus Spike In People Not In The labour Force

There’s a ton of hype today about the 1 million+ spike in people not in the labour force, and whether it undermines the good jobs data.

The chart is actually alarming at first blush.

chart

Yow! Is someone cooking the books? Was there a gigantic exodus of people out of the workforce?

Hate to burst your conspiracy theories, but no.

As SilverOz at The Bonddad Blog points out, the BLS’ own announcement points out that starting this year, brand new population data from the 2010 census is being used:

“Effective with data for January 2012, updated population estimates which reflect the results of Census2010 have been used in the household survey. Population estimates for the household survey are developed by the U.S. Census Bureau. Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population during the decade. The change in population reflected in the new estimates results from the introduction of the Census 2010 count as the new population base, adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process. The vast majority of the population change, however, is due to the change in base population from Census 2000 to Census 2010.

So there you go. New population data is in. Thus this number went up.

Meanwhile, there was a big drop in the participation rate, as Jim Pethokoukis notes. He even goes so far as to call the 8.3 per cent unemployment rate “phony.”

Well, this too is flawed.

Again, more from the BLS:

The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labour force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labour force by 1,252,000. Although the total unemployment rate was unaffected, the labour force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labour force participation than the general population.”

All clear.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.