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In their prime, out of the labor force

Mitchell Hartman Dec 7, 2015
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The Department of Labor reported that non-farm public and private sector payrolls increased by 211,000 in November; job creation in September and October was revised upward by 35,000. Job gains are averaging 218,000 per month since late summer. 

And the unemployment rate has now fallen back to 5 percent (it was unchanged in November). That’s the same level as when the recession started in December 2007. But that improvement is in part because labor force participation has declined, so fewer former and potential workers are looking for jobs now. 

Elise Gould at the Economic Policy Institute said the most problematic group is prime-age workers.

“They’re 25 to 54 years old — so you get rid of any demographic shifts that are happening with baby boomers retiring, or young people sheltering in school,” Gould said. “There are still 1.17 million missing (prime-age) workers  who have left the labor force, who have stopped actively looking or haven’t started actively looking.” 

Why so many remain out of the labor force at this point in the recovery is somewhat of a conundrum for economists. After all, there are many more job openings now than a few years ago, and employers are increasing pay, especially for entry-level jobs in retail and fast food. 

Labor economist Michael Strain at the American Enterprise Institute said many workers dropped out of semi-skilled occupations like construction and manufacturing, which nosedived during the recession. Strain said these workers were used to making decent wages when the economy was stronger, and what is on offer now may not seem worth it.

“For those workers, wages have actually fallen,” Strain said, “and that in and of itself is a compelling reason for those workers not to enter the workforce.”

Strain believes government safety-net programs such as disability and unemployment insurance might be helping people survive financially without punching in for a paycheck. 

And he thinks that in time, we may discover societal changes at work too, “whether it’s becoming in some sense culturally less difficult to go for long periods of time without having a job.”

Strain and Gould both speculate that it may be more common and acceptable now for young adults to live at home until their early 30s — whether or not they’re working or pursuing an education. And more families may be trying to make ends meet — at least for a limited period — on a single income, so the other parent can provide full-time child or elder care.

 

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