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Sunday, May 6, 2012

Labor Force Participation

Our chapters on bureaucracy and economic policy discuss the economic statistics that the federal government publishes. When calculating employment, the government looks at the civilian noninstitutional population over the age of 16.  Those who are working or looking for work are in the labor force.  The labor force participation rate rose from the 1960s to the 1980s as more and more women sought jobs.  As this graph shows, however, the rate has dropped since 2008 to a 30-year low of 63.7 percent.

Felix Salmon writes at Reuters:
This chart is just petrifying. The participation rate started falling after the dot-com bust, leveled off during the credit boom (but never really rose much), and then fell off a cliff when the recession started. You’d think it would have started to bounce back up by now, but no. Instead, we’re now deep into pretty much unprecedented territory. Yes, the participation rate has been this low before — back in 1981. But that was during the decades when women were still properly moving into the labor force.
As Mike Konczal noted this morning, a key indicator of labor recession is still in force: if you’re unemployed, you’re still more likely to drop out of the labor force entirely than you are to find a job. And as Dan Alpert noted, in a country of 314 million people, there are only 115 million full-time workers and 27 million part-time workers. It’s really hard to get a robust recovery when the number of people earning money is so anemic.
For demographic reasons — the retirement of the baby boomers — the labor force participation rate is naturally going to fall over the next decade. But go back just one year, to March 2011, and look at the official CBO projection of the labor force participation rate. The CBO saw a rate of 64.6% in 2012 — a full percentage point higher than we’re at right now. The participation rate wasn’t expected to fall to today’s level of 63.6% until 2017.