Glenn Hubbard
The Wall Street Journal
4/4/2014
A big puzzle looms over the U.S. economy: Friday’s jobs report tells us that the unemployment rate has fallen to 6.7% from a peak of 10% at the height of the Great Recession. But at the same time, only 63.2% of Americans 16 or older are participating in the labor force, which, while up a bit in March, is down substantially since 2000. As recently as the late 1990s, the U.S. was a nation in which employment, job creation and labor force participation went hand in hand. That is no longer the case.
What’s going on? …
…Is the problem cyclical, so that, if we push for faster growth, workers will come back, as they have in the past with upturns in the business cycle? Or do deeper structural problems in the economy have to be fixed before we can expect any real progress? To the extent that problems are related to retirement or work disincentives that are either hard to change or created by policy, familiar monetary or fiscal policies may have little effect—a point getting too little attention in Washington…
…The unemployment rate, the figure that dominates reporting on the economy, is the fraction of the labor force (those working or seeking work) that is unemployed. This rate has declined slowly since the end of the Great Recession. What hasn’t recovered over that same period is the labor force participation rate, which today stands roughly where it did in 1977…
Read the complete article at The Wall Street Journal.
Related: CNN: Jobs report a “disappointment,” still digging out of the hole from recession
…Romans hits the nail on the head with her chart — and with her caveat that it is not adjusted for population growth. “You’ve had people coming into the labor market,” she explains, “you’ve had new immigrants, you’ve had people graduating from college.” Just getting back to the level of 2007 means falling seven years behind in population growth. That’s reflected in the generational lows of the civilian workforce participation rate, and the millions of long-term unemployed still sitting on the sidelines…
