Calculated Risk posted about the participation rate was expected decline because of the demographic shift. Bill McBride has a great blog, and I normally don’t disagree with his posts, but this posts conclusions don’t add up for me.
Some of the recent decline in the participation rate has been to due to cyclical issues (severe recession), but MOST of the decline in the overall participation rate over the last decade has been due to the aging of the population. There are also some long term trends toward lower participation for younger workers pushing down the overall participation rate.
• This decline in the participation rate has been expected for years. Here are three projections (two from before the recession started). The key to these projections is that the decline in the participation rates was expected:
While I agree the demographics are going to shift with the aging population, I don’t see any evidence that is happening. The projections I believe are real, but the evidence doesn’t support that this is the current cause to drop in participation rate. In fact, it appears to be just the opposite.
With this Great Recession, umm or Great Recovery… people are not retiring like they planned. I had posted on this before here.
See this chart below from the St Louis Federal Reserve. Notice all Age Groups employment levels have gone down EXCEPT the 55 and older. (that is orange line on the bottom skyrocketing up.) It doesn’t look like there is a massive wave of Baby Boomers retiring from this chart…
The only demographic shift I see here is the age groups 25-44 years are losing employment, perhaps they took early retirements??
If you link to Economist’s View recent post, he represents this same data in the form of participation rate by age group and comes up with similar conclusions. Actually, his charts really show how alarming this is -I highly recommend checking them out.
Thousands of Persons
Monthly, Seasonally Adjusted, Updated: 2012-10-05 9:18 AM CDT