The Jobs Crisis and Baby Boomer Retirements

The gradual decline in the unemployment rate over the past 4 years does not reflect rising prosperity.  It is a statistical deception, due entirely to a shrinking labor force.

The Labor Department’s Jobs report for the month of April once again called attention to the alarming drop in what statisticians call the “labor force participation rate.” Arc-of-participation-May13

Labor force participation is the percentage of the working age population that is “in the labor force.” They are either employed or qualify to be counted as “unemployed.”  Not everyone who is out of work and wants a job is officially classified as unemployed. When people have been out of work for a long time they tend to become discouraged and don’t engage in job seeking activities often enough to meet government criteria and are thus no longer included in the labor force or counted as unemployed.

The recent, steep decline in the Labor Force Participation Rate has meant that fewer jobless people are being counted in computing the official unemployment rate which was 7.5% in April.  If the Labor force participation rate had been the same in April as it was at the end of 2008, the April unemployment rate would have been 11%.

For years President Obama’s supporters and most of the media simply ignored the falling participation rate and hailed each incremental drop in the unemployment rate as “proof” that his policies of maximum government borrowing, spending and regulation “worked.”  But in recent months they’ve been forced to acknowledge the elephant in the labor statistics room, and have responded with a contrived explanation.  Now they tell us it reflects not discouraged workers but retiring baby boomers.  Thus, they say, it is not the bad news it appears to be, it’s a predictable demographic trend.

But an examination of the available data debunks this explanation. 

  • The emerging “millennial generation” is larger than the boomer generation.  So for every boomer who reaches retirement age there is one – actually a fraction more than one – young person reaching working age who should be seeking work and thus, should be counted as “in the labor force.”
  • The monthly jobs statistics contradict the baby boomer retirement story.age-group-participateAs the chart above shows the only age group whose labor force participation has increased since the end of the recession in 2009 is the oldest group, those over 55, which includes the oldest half of the baby boom generation.  Labor force participation by younger groups is the same or less than it was when the recession ended.
  • Statistical comparison of those over 65 with the prime working age population between 20 and 64 is even more dramatic:over-under-65

The data in this chart show that reality is the opposite of what the President’s supporters tell us.  The overall labor force participation rate has fallen not because of senior baby boomer retirements, but because younger people in the prime working ages between 20 and 64 have quit looking for work and have been reclassified as out of the labor force. 

Meanwhile more and more people who have reached the traditional retirement age continue to work.  Since the recession, labor force participation among those over 65 has increased from 21.7% to 24%.  And an unprecedented 52% of those who reached the age of 65 since the end of 2011 are still working.

These data contradict assertions that retiring baby boomers are the reason for falling labor force participation.  It turns out that the oldest groups are the only ones bucking the trend with increasing participation rates.

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