Saturday, November 5, 2016

The US Demand For Gasoline, Jobs, Unemployment, And The US Labor Force Participation Rate -- November 5, 2016

Gasoline demand:

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Jobs Report

Jobs report: I posted this yesterday, but never got around to finishing it --
Jobs: first stories coming out on the jobs report today are rosy, but by the end of the day we will know how bad the report really is. Again, the numbers underwhelm. The only reason the unemployment rate ticked down was because a larger number of folks dropped out of the labor force. The numbers are bad, not really, really bad, but bad. We'll post them later. I'm getting ready to go biking -- before the rain hits.
First, the numbers:
Then the spin: The New York Times was literally giddy overt this jobs report.

The magic numbers: New jobs: 200,000 (< 200,000 new jobs: economic stagnation). This is the number that was used throughout the George W. Bush presidency and in the very early days of the Obama administration. 

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Gasoline Demand and Jobs

My thesis is this:

Gasoline demand in the US is driven by two numbers:
  • commuting miles to work
  • leisure miles
Generally speaking:
  • leisure miles is affected most by an individual's income, and the price of gasoline (comparing same months year-over-year).
  • commuting miles to work -- pretty much depends on whether one has a job or not; public transportation year-over-year changes very, very little
Right now, oil prices are as low as they have ever been, taking into consideration the value of the dollar, inflation, cost of living, whatever -- gasoline is very inexpensive, and incredibly available. In this month's report, it was also stated that wages have increased. So, wages are increasing, the price of gasoline is down, and yet, the demand for gasoline has plunged over the past few weeks. That would suggest there has not been a decrease in leisure driving. In fact, with more and more folks out of the labor force, more and more of these folks, when driving, are driving either for leisure, or to the bank to deposit unemployment checks. Or disability checks.

So, when I see the demand for gasoline plunge in the US -- as it did over the past few weeks -- I assume it is related directly to job growth, and the jobs reports seem to bear it out.

There are a lot fewer folks driving to work these days because the percent of Americans not in the labor force continues to rise. The absolute number not working would also be rising because the population of the United States is rising.

Number of Americans UP x percent of Americans not in labor force  UP = number of Americans not driving to work UP. This is not rocket science.

With no spin whatsoever, directly from Google when asked "percent of Americans not in the labor force":
Labor Force Participation Rate in the United States averaged 63 percent from 1950 until 2016, reaching an all time high of 67.30 percent in January of 2000 and a record low of 58.10 percent in December of 1954. Labor Force Participation Rate in the United States is reported by the U.S. Bureau of Labor Statistics.
That google reply came from tradingeconomics. The US Labor Force Participation rate. The recent slight increase is due to an increase in service jobs (aka "flipping hamburgers"):



2 comments:

  1. Bruce,
    Thank you for all that you do with this blog, I truly enjoy all of it. I have a question regarding this graph, wouldn't we expect the labor force participation rate to drop as the baby boomers retire? No political agenda here, just a data geek :)

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    Replies
    1. Everything I've read suggests that the bulk of the drop is due to folks who could be working are dropping out of the work force.

      I assume the labor force is defined as those below the age of retirement. Once you have reached the age of retirement -- age 65 -- I assume is the BLS definition -- you are no longer considered part of the labor force. If you "retire" before age 65, you have dropped out of the labor force, and you are correct in that regard: I assume a lot of folks "retire" before age 65.

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