Looking at these two charts together is a quick way to become demoralized about the American economy:
Yes, the unemployment rate has fallen. But almost the entire reason it has fallen is the drop in the number of people in the labor force — either working or actively looking. As Binyamin Appelbaum has noted, the share of adult Americans with jobs is essentially unchanged over the last three years.
In a brief new report from Express Employment Professionals, a staffing firm, the company’s chief executive, Bob Funk, refers to the problem as “the great shift.” This shift long predates the recent financial crisis, too. The labor force participation rate peaked more than a decade ago.
If the decline stemmed largely from an aging work force, it would be much less worrisome. But the initial wave of baby-boomer retirements plays only a small role in the drop; the labor force participation rate has fallen almost as sharply for people aged 25 to 54 as it has for the overall adult population.