Losing participation points
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Today, the White House tried to answer one of the thorniest questions about the U.S.â€™s post-recession economy: why, despite the recovery, has the percentage of working-age Americans that are either working or looking for workÂ steadily fallen? At the beginning of the recession in December 2007, what economists call the labor force participation rateÂ was 66%. It is currently 62.8%, the lowest itâ€™s beenÂ since the 1970â€™s.
About half the answer,Â the Council of Economic AdvisorsÂ says, is that Americaâ€™s workforce is getting older and â€śolder individuals participate in the labor force at lower rates than younger workers.â€ť Another third of the drop is due to pre-recession trends like declining participation by so-called prime age workers, plus the particularly nasty but inchoate effects of the Great Recession, like a big rise in the ranks of theÂ long-term unemployedÂ (economists think this pushes down the participation rate but are not completely sure why). Another sixth of the decline is due cyclical factors (the normal ups and downs of the economy).
Business Insiderâ€™s Myles UdlandÂ points out that the White House is chiming in on a highly politicized debate regarding just how strong the labor market is. The Obama administration is saying,Â the WSJâ€™s Josh Zumburn writes, that â€śonly one-sixth of the decline is clearly attributable to the weak economy.â€ť
Matt YglesiasÂ thinks the most important issue for ordinary people isnâ€™t about demographics or business cycles, but about what the paper calls the â€śresidualâ€ť: the fall in the participation rate that we canâ€™t quite figure out. Unfortunately, he says the study doesnâ€™t come up with any firm answers about whatâ€™s causing this chunk of the decline. AsÂ Felix SalmonÂ pointed out in 2012, the last time the participation rate was this low, trends like women joining the workforce en masse were still unfolding. Other factors are at work now, and are part of the reason why the US is in the midst of itsÂ weakest post-war recovery. â€”Â Ben Walsh
On to todayâ€™s links: