Salient to Investors:

A. Gary Shilling at A. Gary Shilling & Co writes:

The outlook for the labor market remains bleak. Older Americans are holding onto jobs longer, limiting openings for newcomers, and employers are extending working hours and paying overtime rather than hiring.

In June 2013, almost 11 million people collected disability benefits versus 3 million in 1970, while disability benefits are higher now relative to wages. Many states try to shift people off the welfare and Medicaid rolls, which is their responsibility, toward disability, which is the fed’s.

The percentage of the population on welfare rose to 4.7 percent in 1990 from 1.4 percent in 1950, then fell overnight to 2.1 percent in 2000 due to workfare.

With government benefits, many people are financially better off at home than looking for a job or working for low wages, given commuting costs, child-care outlays, and other job and job-hunting expenses.

It takes 3.2 percent real GDP growth just to keep the unemployment rate steady: so at the current growth of 2 percent, the unemployment rate would rise more than 1 percent a year. The current low unemployment rate relative to the historical expectation appears to be the result of the decline in the labor participation rate.

Many of the 2 million people who have left the labor force in the past two decades for non-demographic reasons will probably never re-enter. Putting people back to work is not simply a matter of creating more aggregate demand; there are meaningful structural problems.

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Why Tight U.S. Labor Markets Are Here to Stay