The Happy Baby Boomer Retirement Lie

Suppose a man in his fifties loses his job and, after months of actively searching for new employment gives up looking for a while even though he still wants a job.  Is he “unemployed” or “retired?”

As the chart shows, the labor force participation rate – the percentage of the working age population that is classified as “in the labor force” either by holding a job or actively seeking a job – has declined in tandem with the unemployment rate for 31 months, because millions of men and women have been reclassified from “unemployed” to “out of the labor force.”  If they were still counted as “unemployed” the unemployment rate would now be over 10% instead of 8.1%.

Obama supporters in the establishment media are seeking to change our perception of this statistic from the national tragedy it is to a happy indicator of early baby boomer retirements.  Typical is a piece by Ezra Klein, a twenty-something whom the Washington Post presents as a senior economic sage:

The explanation is a little-watched measure known as the labor force participation rate…Between March and April, it dropped by 342,000. But because the official unemployment rate counts only those workers who are actively seeking work, that actually made the unemployment rate go down. Critics of the Obama administration have been quick to seize on this as the real reason for the falling unemployment rate…Economists say the story is considerably more complicated.

Beware of establishment commentators who start their analysis with “economists say” or “experts say.”  It usually signals that what follows is little more than their own, uninformed speculation.  Klein continues:

For one thing, the trend predates President Obama…The percentage of Americans in the labor force has been declining for more than a decade.  In January 2000, 67.3 percent of Americans had a job or were actively seeking work. By [December] 2007, just before the recession, that had fallen to 66 percent.

This chart provides perspective that somewhat contradicts Klein’s implication that the decline in participation is a long term trend rather than the immediate result of the current, weak economy.  The participation statistic always fluctuates from month to month. So to bolster his theory Klein picked January 2000 the month of the highest rate ever reported as his starting point.  As the chart shows the participation rate declined during and after the recession of 2001-2002 but began rising again during 2006 and the first part of 2007.  Then, due to the mortgage crisis and another recession it began declining again.  The rate of decline increased dramatically beginning in 2009.

Within the Labor Department’s monthly jobs report is a lot of additional data that contradicts the theory that carefree baby boomers who retire early account for the drop in the labor force participation rate.

The Labor Force Participation number we see published in the media is the percentage of all people over the age of sixteen who are either working or seeking a job.  In April it was 63.6%.  Deeper in the monthly report are statistics that break the rate down by age group.  This chart breaks the population into two groups, under and over 65.  It shows that while the participation rate of younger people has gone down over the past four years the participation rate of people over age 65 has actually gone up, indicating that more of the oldest baby boomers who reached 65 last year are continuing to work or seek work rather than retire.

The last chart shows the number of Americans in each of the age group who had jobs in December 2008, and in April 2012.  It turns out that the only groups with an increase were 55-64 and over 65, the oldest two thirds of the baby boom generation.

As the Presidential campaign continues we’ll be hearing more and more about the Labor Force Participation Rate and, more of the myth of  happy, prosperous baby boomers who have retired early.  But the statistics show the harsh reality that the baby boomers as a group continue to work or seek work later than the previous generation. 

Most baby boomers aren’t old enough to retire, especially after the financial crisis of 2008 decimated their retirement accounts.  Just this year the oldest boomers, those born in 1946 who are only 3.5% of the total, are turning 66, the age at which they qualify for full Social Security benefits. Sixty six percent of baby boomers are still under the age of 60.

The Obama economy is not a happy place to be if you’re in your sixties and wondering how much longer you’ll be able to work and what you’ll live on when you can’t.

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