Fall in the unemployment rate is a mirage, participation rate at lowest since 1978

Author: Adam Button | Category: News

Author: Adam Button

At 63.2%, the US participation rate hasn’t been so low since 1978.

To give you a sense of how bad that is, disco was all the rage and housewives were still common because a large portion of women still hadn’t chosen to enter the workforce. Good luck raising a family on a single income in 2013.

The participation rate has been forecast to fall for a decade because of aging baby boomers but not at this pace. It’s clear that a large portion of unemployed in the US have simply given up looking.

US labor force participation rate since 2002

US labor force participation rate since 2002

To give you a sense of what a healthy market might look like. Here’s Canada, which has very similar demographics compared to the US but has 3.4 more workers per hundred people.

The drop off since the crisis has also been much less pronounced.

Canada labor force participation rate since 2002

Canada labor force participation rate since 2002

The Fed has done all it can on its employment mandate but it’s clear at this point that some massive, structural shocks are needed to change the US workforce. Only the government can do it and this Congress is hapless.

To further add to the case, look at this chart that breaks down labor force participation by age. Older people are actually joining the workforce while it’s young people, especially those below 25 that are giving up on finding work. It’s quite literally old people taking away jobs from young people and forcing them to give up.

participation rate by age

Wal-Mart greeter is the last job left in America.

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