There are reasons to be upbeat about the economy. Fewer people are filing for unemployment, people are spending money and companies are hiring. Employers added 223,000 jobs last month, and unemployment fell to 5.3 percent.
That’s pretty good, but there’s always more to a story than the headline. Usually, more jobs mean more job seekers. That wasn’t the case in June. Instead, the share of Americans working or looking for work fell to 62.6 percent, the smallest in 37 years. The last time labor participation was this low, a 30-year mortgage was 9 percent and rising fast.
One month doesn’t make a trend, but 15 years does. That’s about how long labor force participation has been sinking. In 2000, about 67 percent of Americans were in the workforce.
What does it mean?
If more than a third of Americans don’t have a job and aren’t looking for one, what are they doing? Baby-boomers are starting to retire. Young adults in greater numbers are going to or staying in school, for reasons good (to learn something) and bad (they can’t find jobs).
Shifting demographics don’t explain everything, though. Look at the chart. Since the recession, the kind of people you’d think should be working – young adults and college graduates – have been dropping out of the labor force. In fact, people with a college diploma have been falling out of the workforce since the Labor Department began tracking them in 1992.
Those baby-boomers aren’t retiring in droves, either. In fact, more people 55 and older are staying in the workforce. Their participation hit a historic low of less than 30 percent in the 1990s and has been rising steadily ever since. Today, about 40 percent of them are working or looking. Is that because they have to or they want to? No one knows for sure.
We do know that work itself is changing. Temp employees hit an all-time high of 2.9 million in May and now account for 2.4 percent of jobs. And as the gig economy grows (think Uber and TaskRabbit), its on-call workers have less stability and fewer benefits such as health insurance or sick leave. Credit can be tough to get, too. And a mortgage? No way.
So what? Today’s report could give the Federal Reserve pause, which means interest rates might not rise as soon or as quickly as some people thought. The recession ended six years ago last month, but we’re still in uncharted waters.