Many have heard various economic factions claim the employment situation is improving, that the drop in the unemployment rate is not due to millions no longer being counted in the statistics. These same groups will claim the aging population is throwing off the labor participation rates due to the large number of people retiring, that the record low labor participation rates are a fluke. They claim the flood of retiring baby boomers distort the statistics. Yet a quick look at the data shows this is not the case. We graph labor participation rates by age bracket to show more people as a percentage, 65 years and over, are working in their golden years than ever before.
The thing is, labor participation rates are available from the BLS website by age bracket and these figures reflect the age of the CPS survey participant and the population size of that age bracket group when the monthly Household survey was taken. The labor participate rate is defined as the ratio of the civilian labor force to the civilian noninstitutional population. This is a ratio, a fraction if you will, a percentage of those participating in the labor market against the overall population. Even if the baby boomers increase dramatically the size of America's retired, by looking at labor participation rates via such small age groupings, there are no population distortions by an aging America.
The civilian labor force is made up by those who are employed and those who are officially looking for work. By breaking down the labor participation rate by age bracket, we see there are not more retirees as a ratio for those over 65, in fact a larger percentage of people over the age of 65 are actively participating in the labor force than ever. Each labor participation rate by age group is the civilian labor force divided by the noninstitutional civilian population for that age bracket at that moment in time.
There is one small problem in that labor participation by these age statistics are not seasonally adjusted. Yet, one can obtain a clearer picture by taking the annual labor participation rate average and thus remove seasonality, those wild statistical monthly fluctuations which come from summer jobs and winter snow birds.
We did one better and took the annual moving average of labor participation rates per age bracket in order to get an up to date picture on where these rates are currently. We take the annual average from October to September, just so we have the most recent statistics in our results. Below are the graphs, at the highest resolution available publicly for labor participation by age bracket.
The most important thing the above graph-o-rama shows is, no Virginia, baby boomers are not the cause of the record low labor participation rates. Labor participation rates dropped dramatically for people in their prime working years and thus there really is a large segment of the population that probably needs a job that are not being counted as unemployed. One sees drops in those between the ages of 25-54. Expanding further to the real working years, ages 18-65, we also see drops in labor participate rates .
We can see a host of fallacies blown away quite easily by the above breakdowns More people as a ratio are working in these so called retirement years than before the recession. We also see the death of work for those ages 16 to 19 to the point it's almost shocking. Who doesn't remember that summer part-time job as a teenager? What happened? Were teenagers labor arbitraged and displaced by foreign guest workers and illegal workers? Why did the labor participation rates drop so dramatically and where, pray tell, will they get their first on the job experience from now?
The real question is why aren't all of these factions claiming things are improving, all is well, also not digging out BLS data and creating valid graph-o-ramas such as the above? Beyond the time sink of creating graphical images and calculating partial averages in spreadsheets, we can't think of a damn good reason these same people are not.