Last week's job numbers did little to inspire confidence in the economy. Jed Graham of Investor's Business Daily has done some more digging and has found another piece of bad news. It turns out that employment-to-population by all people aged 16-54, is at its lowest levels since 1982 and 1983:
For all of the attention paid to the labor force participation rate — now at its lowest point since 1981 — much of the decline has little to do with the state of the job market and everything to do with demographics.
Harm Bandholz, chief U.S. economist at UniCredit, figures that fully half of the decline in the participation rate since the end of 2007 is due to the aging of the population and, thus, should have been anticipated.
Since the recession began, the 55-and-up population is up by nearly 10 million, while the 16-54 population is down by a half-million, including a 2.5 million drop among the 35-44 group.
I spoke to an employment expert about about possible reasons why this may be. The chart above shows an understandable decline in the employment-to-population ratio after the financial crisis, but the declining trend begins in the year 2000.
The reasons suggested for early-2000-era decline were not given as definitive, but as possible explanations:
-As more people go to college and as fewer of those college age students apply for full time work while in school, the ratio goes down.
-Expanded access to Medicaid might have allowed more single mothers to avoid needing full time work.
-Additional, it is possible that the initial Bush tax cuts may have been similar to increased Medicaid access because of the expansion of the EITC (Earned Income Tax Credit).
Even if those factors were true, the actual decline since the financial crisis is still distressing. The fact that the ratio is persistent and stabilizing suggests that this ratio might become the new normal for America.
Update: Corrections made to first paragraph.