Say Hello to the GOP's New Favorite Statistic: Workforce Participation
Conservatives are now pointing to America's workforce participation rate to discredit President Obama's job record. They're dumbing down the data, but they're making a keen argument.
Now that the unemployment rate seems to be on a steady decline, Republicans have begun rummaging around for less flattering economic indicators they can use to attack President Obama's jobs record during this election year. To mark today's three-year anniversary of the stimulus, the uber-conservative Republican Study Committee blasted out a graph (above) mapping the decline of America's workforce participation rate, which measures the overall percentage of working-age adults who have a job or are searching for one.
It's a smart move. Outside of policy geek circles (and yes, if you're reading this article, that likely means you), workforce participation is a fairly obscure statistic. It almost surely isn't going to displace the headline unemployment rate in the public's consciousness. But if you want one number to attack the White House on, this is probably it.
Workforce participation is an important figure because it tells us details about the job market that the ordinary old unemployment rate tends to obscure. When the Labor Department tabulates its data, it only counts adults as "unemployed" if they don't have a job but are still hunting for one. People who have given up searching for work get left out of the equation. So if enough people get discouraged by the barren labor market and stop looking for jobs, the unemployment rate, perversely enough, goes down.
The workforce participation rate is a lot more straightforward. It divides the world between people who are in the labor force and people who aren't. If people retire, the rate goes down. If people go back to school, or leave work to take care of their children, the rate goes down. If millions of unemployed Americans throw in the towel and stop looking for jobs, the rate goes down. And as the Republicans' chart shows, the rate has been dropping consistently since Obama came into office. At 63.7 percent, participation is at it's lowest level since 1983.
Republicans are using that decline to argue that the improvements we've seen in the job market under Obama have been an illusion. People aren't finding work -- they're simply giving up on it! The reality is a lot more complicated, but in the end, the GOP has a point.
Right now, economists are somewhat divided on what is actually causing the workforce participation rate to drop so dramatically. Some argue that America's aging population is a major factor. Traditionally, workforce participation levels begin to fall off significantly after people turn 55. And right now, America has a historically high share of 55-year-olds. The first wave of baby boomers turned 65 last year, the traditional age for retirement, and as the country gets grayer, that will naturally pull down the workforce participation rate.
But nearly everyone also agrees that the weak economy has played a role. And when you break down the data, it's clear why. In an analysis published in December, JPMorgan economist James Glassman estimated that no more than half the drop in workforce participation could be attributed to aging workers. He reached his conclusion by looking at where employment would be if you held rates for each age demographic at their pre-recession levels, shown in the graph below. The blue line depicts where participation would be if absolutely no more workers were retiring than before the recession. The red line shows where we actually are. No matter what, participation would still be at worse than two decade lows.
If you examine participation rates by age group, it's also fairly clear how the young are suffering in the job market. Since the start of the Great Recession began, participation is down roughly 5% for Americans between the ages of 16 and 24. It's also down for those between the ages of 25 and 54. Meanwhile, it's risen for Americans over the age of 55. It's even higher for those older than 65, evidence that more Americans are in fact choosing to delay retirement in this rough economy. So even if retirements are playing a role, Americans in their prime working years are clearly leaving the job market, while more older workers are hanging on to their salaries.
There's one more important data point that tells us that the rough economy, and not just retirements, is driving down workforce participation: the number of discouraged workers. Again, these are adults who have given up hunting for work because they think there's nothing out there for them. Their numbers have risen since last year and are more than twice as high as before the recession, as shown in the graph below from the Bureau of Labor Statistics.
None of this negates the fact that the economy is now creating jobs. It just means that Republicans are making a fair criticism: There are more than a million people, at least, who have given up looking for work, and the unemployment rate is benefiting from their absence in the job market. We can argue about who's to blame for that. But if all those discouraged workers go back to looking for employment, the unemployment rate will rise. And that could take the gleam off of the Obama recovery in the eyes of voters.
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