Tim Duy on employment/population ratio
Via Mark Thoma Tim Duy looks at reporting that misses the point even though information can be teased out of the piece. The article can be found here.
I think the article would have felt better if it began not with the impression that baby boomers are the driving force behind recent declines in the participation rate, but could be more of an influence in over time. This, I sense, is what Maki really wants to say:
The effect of the baby-boomer exit from the labor force will become more evident in the coming decade, Maki said. The policy implications may be more pressing, as Fed officials keep interest rates near record low levels for longer than may be required given the likely drop in the jobless rate. That may fuel price pressures in the economy, he said.
Then again, maybe not:
“It means there is less slack in the economy than is commonly perceived, and the slack will diminish more quickly than people think,” Maki said. As a result, “there are more inflationary risks with the very accommodative monetary policy we have now than one might believe.”
I think the near-term reality is a little less dire. And the article eventually gets there:
To be sure, the outlook for jobs may brighten as the economic expansion develops, drawing more people back into the workforce and limiting declines in unemployment. In addition, some economists argue that retiring baby boomers may not be the best explanation for the decrease already in train in the participation rate.
“Demographic trends are pushing down, over time, the normal labor force participation rate,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Nonetheless, he said, “the speed of the decline seen this year is in excess of what one would expect just given the demographic trend.”
A much more measured analysis, one I think consistent with the data. Too bad it wasn’t the central point of the story. Yes, demographic shifts are likely to put downward pressure on labor force participation rates. But the tendency for those 65 and older to work longer than expected pushes in the other direction. Moreover, an improving economy would also increase labor force participation, especially among younger workers. Simply put, the aging of the baby boomers is just one of many factors currently influencing labor force participation rates and, by extension, the amount of slack in the labor markets. (bolding is mine)