LF Participation

In the blogosphere there’s an ongoing discussion of labor force participation (cf. the decline in “headline” unemployment despite few additional jobs). A good example is the Atlanta Fed’s Macroblog, where in a January 17th post Ellyn Terry uses survey data on why people were not participating. So here are two graphs on employment by age bracket, broken into (i) older workers and (ii) younger workers with January 2007 as a base. (I won’t post details, but using a different base does not change things.)

First, since the share of older workers in each age bracket rises, the drop in LF participation is not due to a larger share of workers taking early retirement. Indeed, the data show just the opposite, that older workers are more likely to stay in the labor force than before the recession. (This is not a recent shift. Age breakdowns are available starting in 1994; older worker participation was rising by the late 1990s, but without a longer time series, I can’t preclude that change having started earlier. Nor can I get a breakdown by gender on the BLS web site, though the BLS can likely generate those numbers.)

While I continue to work on a blog post on Mitsubishi Motors, let me put up two further graphs on employment by age bracket, broken into (i) older workers and (ii) younger workers with January 2007 as a base. (I won’t post details, but using a different base does not change things.)

First, since the share of older workers in each age bracket rises, the drop in LF participation is not due to a larger share of workers taking early retirement. Indeed, the data show just the opposite, that older workers are more likely to stay in the labor force than before the recession. (This is not a recent shift. Age breakdowns are available starting in 1994; older worker participation was rising by the late 1990s, but without a longer time series, I can’t preclude that change having started earlier. Nor can I get a breakdown by gender on the BLS web site, though the BLS can likely generate those numbers.)

In contrast, the participation of prime-age workers fell sharply (and that of teens is literally off the chart, so not included). Furthermore, there been at best a modest recovery so far, but no marked decline in any recent month beyond what could be noise. (I graphed a moving average of the number of the 13 age brackets for which the monthly change is negative; overall that’s been around 5 for the past 20 years, and is about that now.)

So if the overall participation rate is falling, but each component is flat or rising, then that has to be a consequence of the population aging, shifting from high participation brackets to lower ones (age 55 and above).

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