Some 4 million people under the age of 55 may be ready to start seeking a job in the United States, according to a Breakingviews analysis. Yet the proportion of older folks working also has increased since before the crisis hit - and they might not be so quick to retire. As the economy improves, these two trends could wreak havoc on the US unemployment rate.
The decline in joblessness - and whether it can continue - is an economic and political hot-button issue. The unemployment rate has tumbled from 10 percent to 8.3 percent in a little over two years. Many fear, however, that the volume of people who abandoned the workforce could return in droves. Analysts at Barclays last week called this theory an "urban legend," and instead blamed retiring older Americans for the drop in labour market participation.
Data from the Bureau of Labour Statistics suggest something more complex. Instead of young people moving into the workforce and older workers leaving it, the reverse has happened over the last five years. For those under 55, the labour participation rate for every BLS segment (16-17, 18-19, 20-24, etc) has decreased. Applying the 2006 rate to the population for each segment implies some 4 million folks are on the sidelines. In theory, if they all started looking for work tomorrow, their collective unemployment rate would jump from 9.5 percent to over 12 percent.
Meanwhile, for every BLS grouping of those 55 and over, the labour participation rate has increased. And there's no reason to think they'll be decamping any time soon. Equity in their homes has evaporated and the stock market has taken a bite out of nest eggs. Even if the 1.3 million older workers who might not otherwise be on the job - again based on the 2006 rates of workforce participation - were to retire, it wouldn't open enough spots to accommodate their younger counterparts.
This demographic flip suggests that, at best, the decline in the unemployment rate will slow, or potentially stop. If the improving economy encourages disillusioned job-seekers to hunt anew, it could push the rate up again. Either way, the US jobs problem looks far from solved.
The US labour participation rate in January dropped to 63.7 percent, the lowest since 1983, according to the latest figures released by the US Bureau of Labour Statistics, on February 3. The country's unemployment rate stands at 8.3 percent, down from a peak of 10 percent in October 2009.
A March 1 report by Barclays Economics Research argues that retirement among baby boomers has played a larger role in pushing down the rate of labour force participation than has discouraged workers' leaving the job market. The analysts also say they believe the shift will continue in the coming years and help open up more jobs for the unemployed.
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