A recent report from the Council of Economic Advisors makes the point that much of the decline in labor force participation is attributable to the rapid growth of people reaching retirement age. That is correct as far as it goes but there are other very troubling aspects of the fall in the overall participation rate.
Early in the second quarter of this year, the unemployment rate for 16 to 19 year olds stood at 19 percent; the unemployment rate for 20 to 24 year olds was 12.8 percent. Certainly these figures are bad for these young people. And bear in mind the unemployment rate counts only those who are not working but looking for work. But that is not the whole story. The great untold story of the last several years has been the big decline in labor force participation of these age groups.
If the participation rates of a decade ago were still in place, the 16 to 19 year old age group would have two million more labor force participants and, assuming the same percentage would be looking for work today, the unemployment rate for teenagers would be 40%instead of 19%. And using the same calculation for the 20 to 24 year olds, i.e., using the decade earlier participation rate, their unemployment rate would be 19% instead of 12.8%. Data is not available to perform these types of calculations on the state or regional employment and labor force data but it is likely that similar dynamic changes have been occurring in the Pittsburgh metro area, although perhaps not as dramatically as the nation as whole.
There can be many reasons for the decline in participation rate of young people over the last six years but the most likely has been the discouragement in finding work. After all, the total number of people working in the U.S. has barely returned to the pre-recession level reached in 2008. Moreover, private sector payroll jobs did not reach the 2008 level until March of 2014. Indeed, in 2010, the job count was lower than the count six years earlier, the first time since WWII that has happened. And what’s worse employment remained below the six year prior reading in 2011, 2012 and 2013. In a country with a growing population of working age people that is a disaster for those seeking work.
So while the retirement argument holds some water, it glosses over the enormous decline in job seekers among the young. A calamity for them in terms of their careers and long term earnings prospects.
