Part of the reason why unemployment is low as well as the labor force participation rate is because of the continuing retirement of the baby boom generation from the work force. The Baby Boom Generation consist of people who were born in the years 1946 to 1963.
Retirement would have no effect on the unemployment rate. Well, theoretically it could make it larger, but that’s unlikely. But I don’t see how you think it could make it smaller.
When the labor force participation rate drops, it causes the unemployment rate to drop.
No it doesn’t
Ok...P=population
U=unemployed
E=employed
L=Labor force
L = U+E
Participation rate = L/P = (U+E)/P
Unemployment rate = U/L = U/(U+E)
So, if the population increases faster than the labor force, which includes the labor force going down, then the participation rate goes down. If the labor force goes up faster than the population, then the participation rate goes up.
But the change in population has no effect on the unemployment rate: only the relationship between employment and unemployment.
The UE rate, then, can go up or down or stay the same regardless of what the participation rate does.
Retirement: that’s negative pressure on employment. So if enough people retire, that could cause employment to go down. But let’s say the number of employed stay the same.
Again: UE rate = U/(U+E)
So if E goes down, but U stays the same, then the UE rate goes up.
But there’s no way E going down can make the rate go down. U would have to go down faster.
Well, then explain the following articles:
Sure, Unemployment Went Down - Because More People Left The Workforce
Labor participation began declining after a high of 67.3% in mid-2000. It dropped to 66.4% in January 2007, just as the economic collapse began, and kept going. Now the country hovers at just below 63% as people have left the workforce.
Some of that is
large college enrollment among Millennials,
while another portion has been women leaving the workplace AND BABY BOOM RETIREMENTS.
Whatever the reasons, we seem to have hit a new stable lower number than was the case in the previous 30 years.
More people have given up on finding work and therefore are no longer counted as either working or unemployed. That's why the unemployment rate keeps dropping. It isn't the underlying strength of the economy that reaches all levels of society. The number of jobs might be keeping rough pace with the growth of the population, but that is it. There is no broad economic cheer.
https://www.forbes.com/sites/eriksh...he-number-of-people-working-did/#5fa3e1ee408b
SHRINKING LABOR FORCE EXPLAINS DROP IN UNEMPLOYMENT
https://www.epi.org/news/shrinking-labor-force-explains-drop-unemployment/#
The following is the impact of the baby boom generation on the labor force participation rate:
"The authors track a rising participation rate from about 60 percent in the 1950s and 1960s to a peak of 67 percent at the turn of the 21st century, after which it has been falling consistently, to a low of about 63 percent today. They cite secular (as opposed to cyclical) forces as the main reason for the decline—primarily, the start of retirement for the baby-boom generation. This cohort has exerted a profound influence on the U.S. economy as it has passed through the age distribution. Born during the years 1946 to 1964, baby boomers have “consistently represented the largest fraction of the population,” and their influence is still being felt as they retire, depressing the labor force participation rate."
"Given that the main cause of the falling labor force participation rate is the retirement of the baby boomers, the answer to the question of whether labor force participation will continue to fall depends largely on how long the baby boomers’ rate of retirement will continue to increase. The authors project that, by 2019, the boomers’ retirement rate will have increased by 1.1 percentage points over the 2016 rate, resulting in a corresponding 1.1-percentage-point decrease in the labor force participation rate. Then, the authors expect retirements to keep rising though the 2020s, so that, by the later years of that decade, the participation rate will have declined by approximately 4 percentage points over the 2016 rate. In short, the labor force participation rate of the late 2020s is projected to be about 59 percent, a rate not seen since the 1950s and 1960s, before women began to enter the labor force in increasing numbers."
https://www.bls.gov/opub/mlr/2018/b...falling-us-labor-force-participation-rate.htm
Labor force participation rate today is at 62.9%. But over the next 8 years, its expected to decline to 59%. That will likely keep the unemployment rates low well into the next decade. Were going from and employers market to an employees market. Great for the employee, terrible for the employer.
U.S. job growth surges; unemployment rate drops to 3.6 %
The labor departments closely watched monthly employment report on Friday showed the greater than expected 263,000 new jobs created last month were spread across most industry sectors and the unemployment rate was just 3.6%, the lowest since December 1969. Still wage gains did not accelerate as expected, holding at a reading that is consistent with moderate inflation.
Moreover, the decline in the unemployment rate was driven largely by the most people leaving the labor force in a year and a half.
https://www.reuters.com/article/us-...-unemployment-rate-drops-to-3-6-idUSKCN1S9075
