Unemployment–behind the official numbers (the myth of the retiring baby boomers)
The eight hundred pound gorilla in the room when one discusses the unemployment rate is its accuracy.
8.1% of what? Apparently, it is 8.1% as measured by those still receiving unemployment benefits, i.e. “actively” seeking work (a requirement to continue to receive the benefits). Here’s the reality:
In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to 88,419,000. This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.
So, that means people have dropped out of the labor market and some have quit looking for work?
Yes. All one has to do is look at this chart and understand that a huge piece of the labor market has simply vanished from the statistics used to compute the official unemployment rate.
The current labor participation rate is equal to that of January 1982. From a high of 67.3% in January 2000, it has dropped 3% since. That is huge.
Yet, we’re only at 8.1%? Not bloody likely. Not if history is any gauge.
So who are the missing workers?
The conventional wisdom out there likes to explain that huge drop away by claiming that the baby boomers are most likely choosing to retire rather than seek work. They further claim there’s no reason to panic, it’s the old folks dropping out and they have their retirement to fall back on.
In fact, the older demographic has remained steady and, in fact, even seen job percentage increases among those thought to be retiring.
Job holders 55 and up have risen by 3.9 million — and fallen by 8.1 million among those under 55, Labor Department data show. It’s been 50 months and counting since payrolls peaked, a post-war record. Labor releases the April jobs report on Friday morning.
For the 65-69 and 70-74 groups, the employed shares are up 1.1 percentage points and 1.6 percentage points, respectively, over the past four years.
So much for that myth. In fact the early retiree level (i.e. those who claim Social Security at the lowest possible age – 62) dropped to 26.9% last year, the lowest since 1976.
As that final chart points out along with the accompanying stats, it isn’t the baby boomers who are causing the labor participation rate to drop. It is workers in the two younger demographics who’ve stopped getting benefits and still don’t have work.
Political implications? Well one can fudge the official numbers all one wishes, but unemployment is a personal thing. Official numbers don’t mean squat to someone without a job and is unlikely to convince them that things are better than they were.
Whether or not the official number drops below 8% before the election, the reality of unemployment to those 5 million without a job and not carried in the official number remains.