Tuesday, May 13, 2014

LABOR FORCE PARTICIPATION RATE NOT A BIG DEAL UNTIL "PRESIDENT BLACKENSTEIN" ARRIVED


Barry Ritholtz has a spectacular piece that explains why we have had a sudden concern over labor force participation rates in America. Labor force participation rates (LFPR) measure the number of working age people (beginning at age 16) who are actually participating in the labor market because they are working, or looking for work.

The LFPR started rising in the early 1960s (from about 59 percent) and began to slow and decline in 2008. Under President Obama the LFPR has dipped from about 66 percent in 2008 to 63 percent today.



If you listen to those on the Political Right the sky is falling, and it's all President Obama's fault. But the reality is quite different.

Specifically, as Ritholtz makes clear, there are two things happening. First, because of the Baby Boomer generation (those born between 1946 and 1964), we have always known that more elderly people would be around about this time. The growing number of elderly in our population represent about 40 percent of the shift from 66 percent to 63 percent in the LFPR.



Second, the recession that started under President Bush in 2008 - which the GOP has worked tirelessly to prolong, and dump on President Obama's lap - continues to haunt our economy, which makes it difficult for anyone to find work.

So, yeah, the dip in the Labor Force Participation Rate is a product of primarily two things: Shifting demographics and the 2008 recession.

All of this begs the question, Why is the LFPR suddenly an issue with the far right? Very simple. As Ritholtz points out, the LFPR meant nothing until "President Blackenstein" hit town. Ritholtz adds that this is a "very curious" development.

Indeed.

- Mark 

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