One of the, if not the, key topics of debate in the US presidential campaign has been the sluggish economy. For many voters, the spectre of unemployment will be at the forefront of their minds as they go to the polls next week. With this in mind, the Wall Street Journal has published an article about the labour-force participation rate in the US (the number of those in jobs or unemployed but looking for work). On Friday the US government will release its monthly estimate of this rate – and it is expected to continue to decline from September’s figure of 63.6%, which was itself nearly a 30-year low. While other economic indicators are slowly improving (unemployment rate, hiring rate etc) the labour-force participation rate keeps falling. This is apparently not primarily because people are abandoning looking for jobs, but because there are more retires, students and stay-at-home parents than before. In short, because the population make up of the US is changing:
“Indeed, sweeping demographic and societal changes were driving down the participation rate long before the recession took hold. Young people are starting work later as more of them go to college. The flood of women into the workforce, which drove the participation rate up sharply in the second half of the 20th century, has slowed. Most significantly, the over-55 population is growing at more than three times the rate of the adult population as a whole. Even as people retire later, Americans over 55 are still half as likely to be in the workforce as those between ages 25 and 54.”
Apparently the decline in the rate would be happening even without the recession:
"‘We think the evidence is quite clear that the single biggest reason the labor force participation rate has been falling has been the retirement of the baby boomers,’ says Barclays chief U.S. economist Dean Maki. ‘This would have happened whether the economy was strong or weak.’”
But there is no doubt that the continuing bleak economic news is also pushing the rate down – there are those discouraged by the job prospects and have given up on looking for work; those retiring earlier than planned; those staying home at kids rather than attempt to find work; those choosing to go remain in education for longer and wait for things to improve.
Unbelievably, there are 6.4 million drop outs from the workforce in the US who say that they want a job, but fewer than half of them have looked for work in the past year! Even if people do re-enter the job market, there are still such numbers of baby boomers retiring that the participation rate will continue to fall for a long time yet. The Labor Department estimates that the participation rate will fall another 1% by 2020, a slower decline than recently, but still a decline. But this is not all bad:
“For the unemployed, the falling participation rate could be good news: A smaller workforce means less competition for jobs. A rule of thumb holds that the economy needs to add about 150,000 jobs a month to keep up with population growth. With the falling participation rate, Barclays's Mr. Maki figures that number is down to 75,000 to 100,000. That may explain why the unemployment rate has been falling despite relatively anemic job growth.”
Let us hope that the candidate who wins the election can help in someway the US economy and help people back into work. After all, government assistance to the unemployed is a necessity, but it is a necessity that we should aim to not need. Having people in work is better for all concerned.