Compare and Contrast

Compare and contrast Bill MacBride’s attribution of the decline in labor force participation rate to the changing ratio of those over age 55 to those 25 to 54:

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…

with Marcus Nunes’s analysis of employment rates and labor force participation rates of those 55 and over.

I see no way to reconcile continuing increases in the employment rate and labor force participation rate for seniors with an overall labor force participation rate that has declined due to a high proportion of seniors to total population. That something was projected to occur due to changing demographics and, in fact, occurred does not necessary mean that it happened for the reasons that the projections foresaw. Changing demographics only affects the labor force participation rate when all other things are equal. They aren’t.

Update

Mike Shedlock takes a somewhat different tack in contradicting Mr. MacBride’s observations. In short, Mish notes Bill’s sleight-of-hand in failing to point out that the timeframe over which the decline in participation was projected to take place was much longer than the period over which it has actually taken place:

In September 2005 the participation rate was 66.1. In September of 2010, the participation rate was 64.6 which Szafran did not expect until 2015. The current participation rate is 63.6, a number Szafran expected in 2019 perhaps.

12 comments… add one
  • Icepick Link

    McBride has (uncharacteristically) gone into campaign mode – anything to make Obama look good. McBride in the comments to the post you link:

    The silly season brings out some of the dumbest discourse.

    This is an actual quote:

    “[I]f the percentage of the American population who were in the workforce were the same today as the day he was elected, our unemployment rate would be above 11 percent. This is inexcusable.”

    Really? It is “inexcusable” that people retire? It is “inexcusable” that more young people (16 to 19 especially) are staying in school?

    The labor market is still weak, but I think it is OK if people retire – and good long term that more young people are staying in school.

    Yes, it is inexcusable that young people are racking up large debt loads (which they have as little chance of paying back as the Greek government does of paying back its loans) when they’re facing an effective 50% unemployment rate when they’re done getting “educated”. Yes, it is inexcusable that participation rates among those nearing retirement are at an all-time high when those entering the workforce are at an all-time low. How bad is it going to be for SS and MC when the older folks retire and no one is making enough money to pay for their entitlements?

    McBride used to talk about household formation driving the economy forward. How is that supposed to happen when all the college students graduate with a mortgage (non-dis-chargeable!) as well as a piece of paper?

  • I left a comment materially equivalent to yours in the comments section of Nunes’s blog. I wish more people were noting that increasing indebtedness among the young means they won’t be consuming as much in their 20s and 30s as their parents did at that age.

    I think it’s about time I put my oar in for free higher education again. Certainly what most community colleges do can be put online at low or no prices. I have no idea what that would do for the 50% of Chicago young people who don’t graduate from high school on time but it might shut up the higher education fetishists.

  • Icepick Link

    I was thinking about free higher-education over the weekend. (I have no idea what prompted it.) If the Feds want the benefits of education for the masses they should just sponsor full scholarships. Set aside so many scholarships in so many fields. Set up the criteria and just let the thing run.

    Of course the problems with this are too many to list, all political in nature. Actually it’s just too depressing to think about….

  • steve Link

    Labor force participation for those above 65 is 23%. For those in prime time it is about 63%. The over 65 demographic is increasing. The math here is no tricky. Even if the over 65 group is increasing, they are still way below the prime timers. Participation has to drop. The question still remains how much is due to demographics and how much due to a poor economy or other factors.

    Steve

    OT-NIce piece looking at what I have been hoping to find. They look at the effects of increased private debt, not just public, on recoveries.

    http://www.voxeu.org/article/fact-checking-financial-recessions

  • Icepick Link

    steve, the participation rate has not cratered in the last four years because suddenly all the boomers retired. It is happening much faster than any of the actuaries had predicted. Participation rates among younger people have cratered during that time frame. (I’ll also note that including everyone over age 65 in one demographic line is a cheat as well.)

    No, the math isn’t tricky, and the excuse that all these people have dropped out of the workforce because they retired is utter bullshit.

    And let me mention that a lot of the people that have “retired” haven’t done so voluntarily. I know folks that started taking their SS as early as possible because that was the only hope they had of income. Not everyone that retires is going to move into a golf community and get in 19 fun holes a day.

  • steve Link

    “No, the math isn’t tricky, and the excuse that all these people have dropped out of the workforce because they retired is utter bullshit.”

    Strawman. I dont see people on the left claiming that “all” of the drop is from retirements. (Maybe I dont read the right sources?) Having read several papers on this, it appears that about 50% are from retirements. What I think McBride is doing, cant read his mind so dont know for sure, is responding to those who talk about participation and never mention demographics. That is very common.

    Steve

  • steve Link

    “No, the math isn’t tricky, and the excuse that all these people have dropped out of the workforce because they retired is utter bullshit.”

    Strawman. I dont see people on the left claiming that “all” of the drop is from retirements. (Maybe I dont read the right sources?) Having read several papers on this, it appears that about 50% are from retirements. What I think McBride is doing, cant read his mind so dont know for sure, is responding to those who talk about participation and never mention demographics. That is very common.

    Steve

  • Well, I, Mike Shedlock, and Marcus Nunes all interpreted Bill MacBride as attributing all of the decline in labor force participation to demographics so it can’t be that far-fetched. Just for the record I think that some of the decline is due to ordinary retirement, some is due to involuntary retirement, some is due to millions going on disability because it’s better for them than trying to find a job, some is to more people seeking higher education than might otherwise if more jobs were available, and some people just plain leaving the workforce in despair, just to name a few of the causes.

    I don’t know why he’s saying it and I don’t really care. What I care about is that he is saying it.

  • Icepick Link

    Bunk. McBride’s position is that this fall was mostly expected. That’s only true if one ignores the timeline. And what have labor participation rates been doing for those in the 25-54 age bracket? Have they not fallen as well? Yes, it’s fallen about 2%. Imagine that!

    Throw in that it has cratered even more for people under age 25, and that participation rates have also gone up for those aged 55-64, 65-69 and 70-74.

    Also remember that the worst of the effect happened during the recession.

    Claiming that this is some demographic trend is just as stupid as the claim that everyone that lost their job in the last few years did so because they suddenly lost their skills and developed bad attitudes.

  • steve Link

    McBride has written a follow up. I re-read the original. I think it a stretch to say that he claims it is “all” from demographics, but maybe my prior readings influence me, Anyway, in his follow up he makes it more explicit that he is arguing for more, not “all”. He provides his reasoning for believing this. If my ISP works better, will look for the Atlanta Fed articles on this topic.

    “Bunk. McBride’s position is that this fall was mostly expected. ”

    No, a fall was 100% expected. We should only be arguing about the depth and causes.

    http://www.calculatedriskblog.com/2012/10/understanding-decline-in-participation.html

    Steve

  • steve Link

    Atl. Fed piece. They put demographic aging at 40%, but it appears that they ignore the drop in LFPR that started in 2000 for the 16-24 group which McBride notes. Also has links to other Fed papers. So, McBride’s most might actually 40%-47%. Hard to sort out methinks.

    Steve

  • steve Link

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