Monday, September 10, 2012

Out of the Labor Force

Labor force participation rate trend
Said an analyst, closely critiquing
The job market trends that are peaking:
"One is struck once again
By the outflow of men
From the ranks of employed or jobseeking."

"This development's long been projected
With retiring boomers expected,
But nothing so strong
Came to push it along
As the 2008 fiscal wreck did."

"Whereas once the laid-off might be prowlin'
For jobs from the ads they'd been scourin',
Many downsized afresh in
The current recession
Are optin' for throwin' the towel in."

Last Friday's non-farm payroll data incited more than the usual discussion for the fact that the unemployment rate declined even as more people were not working. This prompted much discussion (including limericks) of the labor force participation rate, which has declined sharply since 2008. The Atlantic's Derek Thompson anticipated this discussion when he asked earlier in the week: "Why Are So Many Men Dropping Out of The Workforce?" Not only has the LFPR declined in the last few years, but men's participation has been in decline for three generations.

Since the 1950s, men have slowly flowed out of the workforce as women have flowed in. Some of this male outflow stems from an aging workforce headed into retirement. In the Great Recession, older men may look pessimistically at their job prospects and decide, in many cases, that their wives' incomes and their social benefits comprise an acceptable fallback position. Thompson concludes that "the combination of an aging workforce (which we cannot control) and a weak economy (which we can control) has tugged down the participation rate, which in turn has tugged down the unemployment rate -- and threatens to make us poorer in the long term."

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