Here are a few notes on government employment trends, and how they relate to the recent employment report. All graphs are interactive.

From the BLS Labor Report,

Government employment changed little in June (+26,000). During the first half of 2014, employment at the federal level declined by 23,000, continuing its long-term downward trend, while local government added 76,000 jobs. State government employment changed little in June, and has changed little, on net, in 2014.

Illustrated graphically, the trend over the last fifty years shows and uneven decent, which not only correspond to recessions, but are most likely the result of technology, innovation and consolidation:

Yet other FRED data seems to indicate that, taken on the whole, government (all levels) are hiring and adding to some of the employment numbers:

Additionally, the rebound of the “all government” measurement of employees has occurred in less than two years:

And  consistent with the BLS report, local government surged, adding to the employment numbers by 76,000:

Finally, the rebound for state and local government shows a different picture in terms of length of time to recover:

Which illustrates this final graph demonstrating over the long haul, which agencies were hit the hardest – the ones where all of us live:

By now, the study from the Brookings Institution, Is a Student Loan Crisis on the Horizon? has been gone over with a fine toothed comb. And the findings of the study are remarkable with a premise reflected by comments such as,

Typical borrowers are no worse off now than they were a generation ago, and [the data] also suggest that the borrowers struggling with high debt loads frequently featured in media coverage may not be part of a new or growing phenomenon. The percentage of borrowers with high payment-to-income ratios has not increased over the last 20 years—if anything, it has declined.

I think most people who read the above quote, whether in its context are not, have similar reactions. Namely, that this data simply does not, or cannot, square with a number of other variables that we know to be true regarding the pace of economic recovery for the last five years, employment, partial employment and unemployment, a growing variance in the income strata that is undeniable and leaving less and less in the middle, and a record low employment participation rate being among those in their twenties. But gut feeling, and anecdote do not prove anything, what about the data?

As a side note, I have come across a number of recent articles that have come out in a full-orbed, thoughtful response calling bunk on both data journalism, and the childlike faith whereby we accept astonishing correlations that we have never seen before, simply because they are backed up by data sets. I’m not saying there is not value and validity to statistics, but I do think our sociological infatuation with them in pop culture represents an innovation (in the bad sense) in need of some correction.

Dissenting Voices

There have been a number of dissenting voices, and one particularly effective one appeared on the Awl.com, That Big Study About How the Student Debt Nightmare Is in Your Head? It’s Garbage. The article treats volume of debt and rapidly rising tuition, but the ringer is this,

Do you see where that says “based on households with people between 20 to 40 years old with at least some education debt”?…Those aren’t households with people between 20 and 40; those are households headed by people between 20 and 40. Which is to say, this data excludes all people living in households headed by, say, their parents, or other adults.

Another commentary came from a very weighty source, Liberty Street Economics of the Federal Reserve Bank of New York,

We read with interest a new Brookings Institution report, Is a Student Loan Crisis on the Horizon?, assessing the weight of the student debt burden. It was also pleasing to see the New York Times, several of our Twitter followers, and others citing work on this blog in counterpoint.

As part of our policy responsibilities at the New York Fed, we track the landscape of consumer credit, including student loans, using a unique data set developed here. A team of microeconomists described our approach in a March 2012 blog piece on “Grading Student Loans,” and reported key metrics such as the total outstanding student loan balance, averages balances per borrower by age group, and delinquencies at that time. Much of that data is updated quarterly here.

The New York Fed reports that among all other types of debt that increased in 1Q 2014, student loans weighed in with an increase of $31 billion. But most significantly, among the constellation of non performing assets, student loans topped the 90-day delinquency rate with a measurement of 11% – a full 2.5% above credit card delinquencies.

How are bankers reacting?

In The Wall Street Journal, an article titled, Bank Secrets Can Do Investors a Service revealed the following:

Banks have largely stopped making a very common type of loan. Investors should take note. In a recent paper titled “Banks As Secret Keepers,” four economists argue that banks are necessarily opaque institutions, concealing their portfolios and concentrating on hard-to-value assets. The reason: When investors and creditors can observe the performance of a bank’s assets too closely, its liabilities become volatile and illiquid. When bank assets are cloaked in secrecy, any given liabilities—deposits, repos, commercial paper—can be traded almost as if it were money.

Adding its own graphic on the subject with one notable item:

And here this the reason:

When investors and creditors can observe the performance of a bank’s assets too closely, its liabilities become volatile and illiquid. When bank assets are cloaked in secrecy, any given liabilities—deposits, repos, commercial paper—can be traded almost as if it were money.

Then this, “an exit often signals that the strategy wasn’t performing as well as hoped.” So what are the non performing assets that have bankers hitting the dump button? “Student lending. If the economists are right about the signaling aspect, this could be the next big troubled asset class for banks.”

As the article points out, even in a worst case scenario, no one expects troubled student loans to have the type comprehensive effects on our economy as the subprime mortgages. But if banking behavior as these institutions seek to mitigate risk is any kind of a leading indicator, all of the data available from the Fed does not seem alarmist at all.

Two charts say a lot about civilian labor participation rates. One from the St. Louis Fed (FRED) showing civilian labor participation over the last 36 years:

The other, from the BLS showing a labor trend over the same time span for those 65 and over:

What are the long-term implications for this? We certainly cannot draw a conclusion based on two charts alone, but this is a recurring theme as we consider retirement (whether it be a pension, Social Security, or any other form) as well as employment among a very large segment of the population made up of Millennial’s. There is a lot of discussion of the number and percentage of Americans 65. The projections in the next 20 years are alarming. A recent post on Five Thirty Eight observes the following:

The recession may have delayed the inevitable for a time. The financial crisis wiped away billions in retirement savings, forcing many Americans to work longer than planned. But the stock market has since rebounded, and there are signs that more Americans are at last feeling confident enough to leave the workforce. The labor force participation rate for older Americans — the share of those 55 and older who are working or actively looking for work — has fallen over the past year after rising through the recession and early years of the recovery. Roughly 17 percent of baby boomers now report that they are retired, up from 10 percent in 2010.

While I agree that some temporarily prolonged entering retirement due to market, the problem with this conclusion on its own is that the trend of increased participation rate among this age group predates this statistic by about 30 years. What’s more, this trend not only predates the statistic, but by an astonishing rate of increase in the last fifteen or so years. I do not believe this trend is the result of simply living longer and certainly not the result of the average American’s job satisfaction. A BLS table for all age groups covering twenty years from 1992-2012 further punctuates this point: steady increases in participation rates as a whole begin with those 55 and older. This really ramps up among those in the retirement age ranks:

I think it is also difficult to draw clear conclusions of what this all means because we do not have a precedent in our country or our labor force to compare this to. Oddly enough, many of those in the higher participation categories have spent much of their careers in what might be considered the golden age of pensions and retirement options. And yet, participation rates from that age group have continued to increase (unless that trend is now reversed permanently based on the series data from the current year). What is required is that we rethink work, careers and entrepreneurship for all age groups. Sixteen years ago Peter Drucker said, “Demographics are the single most important factor that nobody pays attention to, and when they do pay attention, they miss the point.” Speaking of the coming avalanche of retired [age] knowledge workers that he and a few others seem to see very clearly:

Retired knowledge workers with marketable skills are going back to work–but not full-time, not to an office, not to commuting. Working part-time beats sitting at home and moaning or playing bridge all day. The bottom line is that if you go forward to 2010, when baby-boomers will be retiring, increasingly fewer will be blue-collar workers. So most will be able to work well into their 70s.

Three years later (2001) in The Economist, he went on to make the point that while we cannot predict what a new economy is exactly or what it will look like, but that radical and essential sociological shifts are here and now. Perhaps we should have paid more attention to this thirteen years ago. He also pointed out as I stated earlier, the difficulty is that we have little to compare it to in this country. He saw it as plain as day:

Within 20 or 25 years, however, perhaps as many as half the people who work for an organisation will not be employed by it, certainly not on a full-time basis. This will be especially true for older people. New ways of working with people at arm’s length will increasingly become the central managerial issue of employing organisations, and not just of businesses.

Again, adding to this trend, the last six years of our economy has had found implications on what it means for younger people looking for jobs. There is also a remarkable struggle among those of an older age bracket dealing with the challenges of mismatched skill sets. Combine this with the natural order of innovation and technology that now affects jobs previously untouched by technology (information based, service, clerical, etc.) and you have this whole new social order that was spoken of fifteen years ago. In spite of this, there are still tremendous opportunities. But the biggest difference is how much pressure is put on the individual to take active and aggressive steps to take charge of their own future. I think this begins with a complete rework of our perspective of what career means.