Not a lot of writing inside, but I make up for it in charts.
There's been a big thing about people dropping out of the labor force. I'm not
quite sure if it as big of a problem as many people are making it out to be. Since the
start of 2001, the labor force increased by 3.4 million people. In that same time, the
16 and older population increased by 8.8 million, but that doesn't tell you much. This
has caused the labor force participation rate to fall to 65.9% from 67.0% when Pres.
Bush took office.
But who's actually leaving the job market? There's been a couple theories proposed,
like people retiring or maybe some just getting sick of not being able to find work
and living off their savings. Neither one seems to be true.
Here is a chart of the labor force that gets complained about a lot.
However, the late '90s participation rate was above normal. In October 1988 the labor force participation rate cleared 66%, and that formed a support floor that would be bounced off of but not broken until February 2004. A band kind of developed. On the top, a ceiling seemed to exist a little beneath 67%: The rate peaked at 66.8% in January 1990, then at 66.7% in mid 1992, and then at 66.9% in April 1995. However, in 1997 when the tech boom was in full power, there was finally a break above 67%, but it might not have been sustainable. Since the October 1988 clearing of 66%, the average participation rate has averaged 66.6%.
So how do we judge the labor market? Should we really expect to get back to that 67% or maybe instead just think about 66.6%? For the former, we would need 2.5 million people to start looking for a job tomorrow and for the latter only 1.5 million. (With an expected population of 224.4 million by the end of the year, either 3.7 million or 2.8 million new workers or job seekers would need to enter the market.)
So are people retiring to leave the labor force? The chart of the labor participation rate of those 55 and over doesn't show it. More of them are actually staying in the job market longer. Their were stories in the late '90s about people coming out of retirement because of the great salaries and also getting a little bored sitting at home. It looks like they are staying for a while longer.
The big concern many have is that adults are becoming so discouraged that they are leaving the labor force entirely. That would be a problem. Roll the age group down, and look at those mostly out of college, the 25 and over group.
That doesn't look too bad either. Although a tenth of a percentage point below that 67.0% rate that was kept since 1996, 66.9% is the average since 1990. It could be better, and I think it will be better as the labor market tightens, but it isn't quite the mass exodus that some keep saying is happening.
Going down a little younger — those still in school, either high school or college age — and just looking at the 16 to 24 year olds is were we find the missing workers.
But this age group's rate has been falling since the 1970s. I think we can actually figure out where some of these people are too. From 2001 to 2003, the number of high school graduates going on to college (either two year or four year) has grown from 61.7% to 67.1% (projected). This loss isn't people being driven from labor force and their only means of survival, but just not many entering it and instead electing to go onto college. That's hardly a problem. We shouldn't be worrying about this age group. It is the 25 and over we should pay more attention to, and that one doesn't look too bad.
Here is a slightly more detailed breakdown. The only labor force group that appears to be shrinking in any significant manner is the 16 to 19 year olds, and I can live with that.
One more for everybody. The unemployment rate with the same age group breakdown. Pretty much, the older you are in the labor force, the more likely you are to have a job.
If you are out of work, just hope you get past your mid-twenties soon. After that, things don't look so bad.