(Photo: John Anderson for USA TODAY)
The December jobs report has sparked a fresh argument on an issue as
old as the recovery: whether unemployment is dropping because of new
jobs, or because people have stopped looking.
Released Friday, the
government's report showed the unemployment rate falling to 6.7%. But
it estimated the U.S. labor force shrank by 347,000 last month while
only 74,000 new jobs were added. Just 62.8% of adults were working or
sought jobs, tied for the lowest share since 1978.
For the year,
the labor force shrank by nearly 550,000 workers to about 154.9 million -
marking only the third year since 1948 when the U.S. workforce declined
on an annual basis.
To skeptical economists like Keith Hall of
George Mason University, that means all of 2013's drop in the
unemployment rate was because fewer people were looking. Only 2.2
million jobs were added last year.
MORE: Economists still upbeat on job market outlook
a group that includes leading Wall Street and Federal Reserve
economists says the drop in workforce participation is about
demographics, not the health of the economy. Mostly, it's about Baby
About 76% of those leaving the workforce in 2013 last
year represented people over age 55 who say they don't want jobs, the
Labor Department estimates.
"Arithmetically, the Boomers will keep
pushing (participation) down done for another 15 years," said Dean
Maki, economist at investment bank Barclays, who argues Boomers'
retirements mean current job growth can reduce unemployment. "We should
get used to it."
Indeed, participation began dropping years before
the recession, and U.S. labor-participation rates are still higher than
in most developed economies.
In 1948, 59% of adults were in the
work force. The rate surged as Boomers grew up and the percentage of
women who worked nearly doubled, peaking at 67.3% in 2000.
decline in "discouraged workers," who have quit looking because they
think they can't find work, also points to economic confidence,
Brookings Institution economist Justin Wolfers said. Discouraged workers
have dropped by 151,000 in the last year to 917,000.
workers too young to retire, it's not clear the economy is inducing many
to leave the job market, Maki said. Other reasons include staying in
school or family responsibilities. The number of 25- to 54-year-olds out
of the labor force who want to work fell by about 90,000 in the last
year, to 2.7 million. Among 16- to 24-year-olds, those out of the work
force but who say they want a job dropped 14% to 1.8 million.