Since the recession began, labor market participation has been falling. In July, just 63.9% of Americans were counted as a part of the workforce, a new 25-year low. Although the number of unemployed Americans remains quite high, the group sitting out of the labor market continues to grow as well.
Some argue that this causes statisticians to underestimate the suffering that the bad job market has caused: if those who have given up looking were considered unemployed, then millions more Americans would be reflected in the national unemployment rate. Others, however, assert that as the population is aging, many Americans are retiring -- possibly early if they've been laid off -- so we shouldn't be too alarmed by the shrinking workforce. Who's right?
This debate can be easily judged by referring to a simple chart. Let's consider how the percentage of employed Americans has changed within various age groups:
I didn't use more up-to-date data than December 2010 because that's as far back as monthly population estimates go on the Census Bureau website. But the labor market hasn't changed dramatically since then, so the chart above provides a pretty clear picture for how the jobs picture has evolved by age group since late December 2007. Over this period, the unemployment rate had risen from 5.0% to 9.4%.