Declining Labor Participation Was Predicted, And It Has A Perfectly Good Explanation

[Theige]

Check out this graph:

The predictions there were made in 2002 and 2006, respectively.

And these charts:

So basically, there are a whole lot more people who don't have jobs and don't want jobs, because they are old, and that explains most of the drop in the participation rate.

 

[amadeus]

What is this graph? Percent of people out of the labor force by age?

 

[Theige]

What is this graph? Percent of people out of the labor force by age?

No, just overall population share.

 

[kochman]

What is this graph? Percent of people out of the labor force by age?

An attempt to tell us the economy isn't that bad, despite all the unemployed friends we know that used to have jobs...

 

[Silurian]

How do they decide that people do not want a job?
The figures seem awfully high.
I assume the figure includes long term sick, people in full time education, people in prison etc.

If it is due to people getting older why have the number of over 55 who want a job increased the most.

 

[Integral]

It is unfortunate that the debt explosion and financial crisis happened right during a large-scale secular demographic transition.

 

[kochman]

It is unfortunate that the debt explosion and financial crisis happened right during a large-scale secular demographic transition.

Wouldn't it mean, if more people were retiring, it would be easier to find a job???

It would seem to account, somewhat, for the terrible percentage of the workforce as to population... but it doesn't explain the high reported unemployment then... if less people are looking, it should be easier.

Thus, isn't this just a double whammy of sucking?

 

[Cutlass]

It is unfortunate that the debt explosion and financial crisis happened right during a large-scale secular demographic transition.

We could always import another 10million workers....

 

[amadeus]

No, just overall population share.

Thanks, I was confused since it seemed like it didn't have a label. I'd like to see how many people 55+ are working now as opposed to 10 years ago. Now, I don't want to argue with the points you're making, I'm just curious about the changes.

 

[Theige]

How do they decide that people do not want a job?
The figures seem awfully high.
I assume the figure includes long term sick, people in full time education, people in prison etc.

If it is due to people getting older why have the number of over 55 who want a job increased the most.

Because overall the number of people who are now over 55 has also increased the most.

The number of people 55+ who are no longer working who also do not want a job far outpaces those 55+ who do want a job. (0.8 to 0.3)

An attempt to tell us the economy isn't that bad, despite all the unemployed friends we know that used to have jobs...

This thread is about the declining participation rate, not the unemployment rate or economy as a whole. Please do not get off-topic.

It is unfortunate that the debt explosion and financial crisis happened right during a large-scale secular demographic transition.

Do you think the latter could have exacerbated the former somehow?

 

[Ayatollah So]

From 2002 to 2012, the blue line goes from 66.6 to 65.5; the red goes from 66.6 to 64.1. The red move is over twice as large. Great Recession for the win at losing. Demographic transition, second place finish.

 

[Theige]

From 2002 to 2012, the blue line goes from 66.6 to 65.5; the red goes from 66.6 to 64.1. The red move is over twice as large. Great Recession for the win at losing. Demographic transition, second place finish.

Right but the blue line is just a prediction. The actual numbers may well have been accelerated by the recession, I'd agree with that.

The main point, though, is that 2/3s of the drop is due to old people who don't want to work anymore.

The other 1/3 is discouraged workers no longer looking for work.

 

[Fugitive Sisyphus]

Assuming the data is accurate, the ~2% difference between the expected decline in worker participation and the actual is around 5 million people without jobs.

 

[choxorn]

Does this mean I can't blame Obama for the bad economy anymore?

 

[History_Buff]

Thus, isn't this just a double whammy of sucking?

Generally I think the answer is yes. Were the population not skewed as old as it is, the unemployment rate would likely be much worse.

But at Theige's request, that's all I'm going to say about that.

 

[pi-r8]

Um I don't think the graph agrees with the title at all? It looks to me like they expected that labor force participation would be down just 1.5% from the peak right now, and instead it's down a full 3%. Having double the expected decline is surely bad??? Especially when you consider that there are people who are old enough to retire but forced to keep working.

 

[History_Buff]

Yes, the predictions are more optimistic than reality. But I believe the point is that they got the trend and inflection point pretty much dead on.

 

[pi-r8]

Yes, the predictions are more optimistic than reality. But I believe the point is that they got the trend and inflection point pretty much dead on.

Everyone knew that the boomers would be retiring soon. But no one expected that people in their 20's would also be "retiring" at the same rate...

 

[History_Buff]

I don't think anyone is saying there isn't an unemployment problem...

 

[pi-r8]

I don't think anyone is saying there isn't an unemployment problem...

Sure, but unemployment is different from labor force participation/employment. The unemployment rate is bad enough as it is, but many people have argued that the "true situation" is even worse than it appears because of people who simply give up looking for work and therefore aren't counted as unemployed. The OP seems to imply that those people are all just baby boomers who were expected to retire anyway, but I don't think the data really agrees with that.