At June’s anemic growth rate of 700 jobs a month, the metro is 3½ years away from rebuilding its labor force to where it was in 2007.
A White House report released in July, “The Labor Force Participation Rate Since 2007: Causes and Policy Implications,” sheds light on what’s happening in the labor force. While dealing in broad brush strokes at the national level, the 53-page report can help with understanding the metro’s generally shrinking labor force.
The starting point for the White House report is the national decline in labor-force participation, from 65.9 percent at the end of 2007 to 62.8 percent in the second quarter of 2014. The decline of 3.1 percentage points in 5½ years is pretty remarkable historically.
“While just under 59 percent of civilian adults were in the labor force in 1963, this rose to approximately 66 percent in 1990 and peaked at 67 percent in 2000, but since 2000 the participation rate has generally fallen,” the report says.
Crunching the data, the report says half of the labor force decline can be attributed to the aging of the population. The Census Bureau recently reported that the 65-and-over demographic was the only age group to grow in New Mexico from 2010-13, so the aging of the population is happening here as well.
It’s no coincidence that labor-force participation began its precipitous drop in 2008, when the first baby boomers turned 62 and became eligible for early Social Security benefits.
Born between 1946 and 1964, baby boomers represent a huge population bubble that, relative to country’s total population, hadn’t been seen before or since. Although boomers are working longer than previous generations, their sheer numbers are skewing the usual patterns of labor-force participation.
The report notes that the simultaneous timing of the Great Recession, followed by its lingering hangover, and boomers hitting retirement makes it difficult to separate the effects of the sluggish economy from the aging of the population.
A third of the drop in labor-force participation from 2007 to mid-2014 – 1 percentage point – falls into two categories: a longstanding trend of a decline in “prime-age” male participation in the labor force and the “labor market disruptions” of the Great Recession.
Overall male participation in the labor force has been ticking down since 1948, which is partially due to longer life spans and, in turn, longer retirements. Participation by “prime-age” men, aged 25-54, has dropped from 92 percent in 1950 to 83 percent in the latest data.
“This decline in part reflects the fact that prime-age men have historically been more concentrated in jobs that can be replaced by technology or sent overseas,” the White House report says.
The overall participation rate for women has trended upward since 1948, boosted by the strong labor markets of the 1970s and 1980s, and hit a plateau of about 60 percent in the 1990s. The rate has since dropped to 56.9 percent in the second quarter of 2014.
The White House report attributes the drop to a lack of family-friendly workplace policies in the United States compared with other advanced countries, where the participation of women in labor forces is generally on the rise.
The labor market disruptions of the recession have resulted in a freaky wave of long-term unemployment of 27 weeks and longer. The long-term unemployment rate is double what it averaged in 2001-07.
One takeaway from the report is that prolonged unemployment renders a person virtually unemployable in the current sluggish economy. Long-term unemployed workers are about half as likely to get a callback for an interview as equally qualified short-term unemployed workers, the report says.
About a sixth of the drop in labor-force participation from 2007 to mid-2014 – 0.5 percentage points – is a cyclical decline seen in previous recessions that stems from jobless workers deciding to defer looking for a job until the economy improves.
The cyclical decline ties into the trends of young college students staying in school longer rather than entering the labor force, and older workers going back to school. These trends are reflected in student loan debt reaching critical mass in this country.
Using a national labor force participation study to explain the metro’s shrinking labor force may be like using an apple to explain an orange, but the study would appear to suggest that the job losses here are not all driven by a weak economy.
Potentially half of the job losses may result from baby boomers retiring from the labor force and presumably not being replaced immediately.