Free Markets, Free People


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.

 

1336146213_LFPRApr2012

 

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.

 

WEBa1jobs0113_345.gif

 

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.

Really?

 

WEBage0504.gif

 

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.

~McQ

Twitter: @McQandO

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21 Responses to Unemployment–behind the official numbers (the myth of the retiring baby boomers)

  • The Chicago Fed recently estimated that demographics explain about half of the drop in the labor force participation rate since 1999.

    The younger crowd has been dropping out, to some extent, to spend more time in school rather than face the poor job market.  That’s not entirely a bad thing, but I’m skeptical that most people build more capital in school than they would in an equal amount of time on the job, so this is a legitimate criticism.  Immigration has slowed too, meaning fewer working-age people looking for jobs.  We can expect both of them to jump back in when we have a sunnier economy.

    Still, there’s going to be growing downward pressure on the labor force participation rate.  Even if the percentage of employed people over age 55 is stable, the number of people age 55+ keeps growing, so they’re dropping out of the labor force.  That would explain a large number of people leaving the labor force – not all of it, but a significant amount.

    We know this: the Right has spent decades observing that the ratio of workers to retirees was set to drop when the Boomers started retiring. Well, it’s been 67 years since the War.  It’s happening.

    So we should expect that to continue even if Republicans retake power and implement better economic policies.  Even if we have a good recovery, the labor force participation rate isn’t likely to get back to where it was before 2006 or 2008.

    • But the data shown in Bruce’s post suggests otherwise, that older people continue to work. I poke at that in my other (first) reply, but I suspect many old people feel the need to continue earning in this bad economy, so they are not retiring as fast as they otherwise would.

  • Well, one possible counter argument might be that the total number of people in the 65-74 year range has increased over the past 4 years. Four years ago those people would have been aged 61-70.

    The leading edge of the baby boom should have turned 65 around 2010, so they should be 67 today. So you would expect this effect in those age 65-67 NOW, and I doubt the 68-74 age group was particularly large. They represent those born 1938 through 1945, I suspect they are mostly a baby bust generation (if I had time I’d verify via google). 

    It doesn’t look like this counter argument holds water.  

    • <i>It doesn’t look like this counter argument holds water. </i>
      No, it’s yours that’s leaking. The graph refers to 55-and-older and is flat.
      It doesn’t matter that a 55 year old in 2000 became 56 in 2001 or 66 in 2011. He was still 55-or-older.

  • Its the old timer’s fault.  They’re hoarding all the jobs.  Time to force early retirement as part of the job’s program. 

    I’m being facetious and we should do nothing about it, but its probably not helping the situation.

  • But Erb just said the economy was recovering!

    • A “growing” economy with 2.2% GDP rise and the vast majority of that being government spending.

      Pwettth.

  • I’ve been looking and so far haven’t found anything current on underemployment.  The way things have been going for a while now it would seem that the underemployment numbers would be high.  I did see something from a year ago that underemployment was lowest in Montana, North Dakota and Wyoming.  All low population states.   (Plus cowboys are already at the top of their employment ladders.  I kid, I kid. )

    • The best to go by is the per capita employment number itself.  It seems to be harder to be creative with that stat.

  • A couple weeks ago on Econtalk, they discussed the ballooning of Social Security Disability claimants. Very frightening aspect to the unemployment issue and also a growing fiscal problem that no one wants to touch, because among the fakers are lots of really disabled people.
    Oh, and did you know that the government actually pays the lawyers of people who are trying to get on disability?

  • While I believe the numbers, those who have dropped out are doing what?  No one seems to have answered that question.  And the leading edge of the boomers is not per the experts today those born in 1945.  That is the old way of thinking.  It is now 1948 for some reason.  All those war time marriages apparently didn’t produce children until 1948.

    • “All those war time marriages apparently didn’t produce children until 1948.”

      That’s because all the menfolk were off sightseeing around the world.