US Employment and GDP

We are a nation of 308 million souls of which approximately 140 million or so are "employed" full time or part time.  Chart 1 shows some of the major categories the US Bureau of Labor uses to monitor America's labor situation  (Click for larger charts)

Chart 1 US Employment Categories

• Civilian Noninstitutional Population:  238 million of us are over 16 and not in jail, not employed full time by the military, and not institutionalized for age or infirmity.  This is the "civilian noninstitutional population" who theoretically could be available for work.
• Not in Labor Force:  84 million of us out of this 237 million say we are not actively looking for work.  We are thus not counted among the "civilian labor force", and are called "not in labor force" 
• Civilian Labor Force:  subtracting 84 million from 237 million leaves us with 153 million people who are called the "civilian labor force".  
• U3 Unemployed:  14.5 million of us out of the 153 million are looking for jobs and have not found them.  We call these 14.5 million Americans  "unemployed".  The most common "unemployment" measure is the ratio of (14.5/153.5)*100 = 9.4% which is called "U3 unemployment".  
• U6 Unemployment:  However "unemployed" in the U3 measure does not include part time workers, some of whom work as little as a couple of hours a week, and nearly 6 million of us currently labeled "not in labor force" who have given up looking for work.  We say we would work if we could find a job.  These 6 million Americans are called "persons who currently want a job" and are called "unemployed" in and reported as "U6 unemployed".  The "U6 unemployment ratio" attempts to measure unemployed and marginally employed workers.  U6 is currently hovering at about 16%
• "Incarcerated"  Not shown Chart 1, but included in the 308 million Americans, are approximately 2.4 million Americans who are imprisoned, and therefore not part of the "civilian labor force".  Presumably almost all of them are between 16 and 65 and therefore would be available for work if they were not in prison.  If we take the 17% U6 number of  153*.17 = 26 million, plus 2.4 million, we get a total of 28.4 million unemployed or marginally employed Americans.  This makes a total of about 28.4/155 = 18% unemployed or marginally employed Americans.

Chart 2 illustrates the change in total available "civilian labor force" and actual "civilian employment" since 2003. 

Chart 2 Civilian Employment

  Note:

1. The flattening in the rate of growth of the available "civilian labor force" as early as late 2006 -- potential workers have stopped looking?
2. The almost complete stop in hiring in late 2006-early 2007.
3. The slowing in the rate of descent of the falling employment numbers in 2010 --signs of a turn around?
4. Total  civilian employment is back to the levels of 2003 and 2004.

On bullet #4 above, consider the GDP values shown in Chart 3.  If the labor force is about the same as the labor force was in 2003-2004, and the borrowing is much lower in 2010-2011, which it is, where will the demand come from to maintain, let alone grow GDP?  Is it reasonable to consider maintaining a real GDP much higher than it was in 2003-2004?

Chart 3 US GDP

Conclusions:

1. If US GDP falls to the same level as 2003-2004 (about $12 trillion) then we can expect a total fall of about 5% to 7% in GDP spread out over the next few quarters. 
2. As soon as this negative growth is apparent, layoffs will resume, unemployment will rise and the destructive cycle will begin again.
3. I see no way unemployment can decrease when both household borrowing and the Federal government fiscal stimulus is drastically reduced.
4. Quantitative easing will help  raise asset values, and thus possibly raise stock prices (and benefit the wealthier asset  holding classes).  
5. Lowered longer term interest rates due to quantitative easing will not necessarily raise house prices (as they normally would) if U3 unemployment remains around 10%, which I think it will.