After the disappointing August employment figures were released last Friday, many analysts shrugged them off as a “blip” or a “fluke.” Yet as New York Times correspondent Nelson Schwartz points out, “the fall in the labor participation rate cannot be dismissed as an aberration.”
As I’ve noted in this space before, America’s overall labor-force-participation rate (LFPR) peaked in early 2000 at 67.3 percent and stood at 66 percent when the Great Recession began (in December 2007). By the time the recession ended (in June 2009), it had dropped to 65.7 percent. Last month, the labor force shrank by 64,000 workers, and the LFPR ticked down to 62.8 percent, a level that, prior to October 2013, had not been seen since March 1978.
In a recent IWF policy paper, I considered the various explanations that have been offered for declining participation. Baby-boomer retirements are clearly a significant part of the story, but they’re not the whole story. Even among men aged 25 to 54, there has been a major long-term decline: The LFPR among that cohort went from 97 percent in May 1965, to 93.8 percent in May 1985, to 90.7 percent in May 2005. When the Great Recession ended, it was 90 percent. In October 2013, it sank to an all-time low of 87.9 percent. And while it jumped from 88.1 percent in July to 88.4 percent in August, it was still lower in August than it had been at any point in recorded history before October 2011.
We are forced to conclude that, as Schwartz writes, “A growing number of people — many in their prime working years — have simply given up on landing a job.”
To appreciate just how much employment has fallen among prime-age workers, take a look at these numbers, supplied by the editors of Bloomberg View:
“As of August, about 76.7 percent of people aged 25 to 54 were employed, according to seasonally unadjusted data from the Bureau of Labor Statistics. That’s a significant improvement over August 2011, when the employment-to-population ratio was at a low of 75 percent. But it’s still about 3.9 million jobs short of 79.8 percent, the average ratio over the 10 years through 2007.”