Another look at falling participation rate for employment

guest post by run75441

Occasionally, I have raised the issue of Participation Rate in decline since Oct/Nov 2001 or the official end of the 2001 recession. Participation Rate is the ratio between the Civilian Non Institution Population and Civilian Labor Force in the BLS Household Unemployment Report. From 1970 until 2001, the overall trend has been upwards as detailed here: A-1 Employment Status of the Civilian Non institutional Population 16 years and over, 1970 to date. (pdf)

I have heard various explanations for this decline such as: baby boomers retiring, increases in disability, people seeking higher education while times are bad, etc. As a baby boomer who took a hit from W$ (rdan update here…W$ = Wall Sreet,com)in the late nineties and a second hit recently, I can assure you most of us will not be retiring soon. Baby boomers retiring would have the largest impact to deceasing Participation Rate and increasing the Not In Labor Force. Baby boomers as a group can not afford to retire. An increase in Disability from 1984 to 2002 as pointed out in Laurent Guerby’s blog (comments section…translation here) may be a factor; but, it is not likely Disability increased that dramatically between 2001- 2008. Laurent also looks at the people in prison and not counted which amounts to 1 in every 100 adults or 2.3 million adults. Violence and crime increases with increases in Unemployment. It is possible that Globalization and Productivity Increases have caused much of the decline also. “Der Spiegel” in its graph here: Dwindling Power – Manufacturing(US Labor) shows that between EOY 2001 and November 2007, ~1.75 jobs were lost in Manufacturing, which is largely male dominated.

It is pretty obvious the U3/U6 numbers do not account for the numbers of people now residing in Not In Labor Force and there was a time in the past when the BLS did account (to my knowledge) for that shift in the Civilian Labor Force. The usage of U3 numbers by financial experts and bankers to cite a tight labor force to justify interest rate increases in the past, in my opinion was patently ridiculous given the increased size of the Not In Labor Force.

It would seem to me that comparisons between 2001-2008 and other recessional periods (yes I am calling this a recessional period) such as the eighties is difficult to do without making adjustments for that percentage of the population no longer in the Civilian Labor Force and residing in Not In Labor Force today. In past recessional periods, Participation Rate either remained steady or increased as the job market improved. By making that adjustment, there would be an apples to apples comparison. Spencer’s post addressed the comparison and I left a comment on it; but, the post does not address the difference in the portion of the Non Institutional population no longer counted in the Civilian Labor Force.

I am interested in opinions, thoughts, and facts as to my assumptions and whether there is a basis for what I see in Unemployment and the continuing decrease in Participation Rate. Thoughts?
guest post by run 75441