by Bill McBride on 11/12/2015 02:27:00 PM
Thursday, November 12, 2015
David Rosenberg, chief economist at Gluskin Sheff wrote about the Labor Force Participation Rate (LFPR) in his daily "Breakfast with Dave" newsletter: THEY AIN’T COMING BACK.
The title says it all. Here is the introduction and his conclusion (a long piece):
There has been a surprisingly large amount of commentary writing off the improvement in the U.S. unemployment rate — which dipped below the Congressional Budget Office’s estimate of the non-accelerating inflation rate of unemployment (NAIRU) for the first time since February 2008 in October — given that we have not seen an attendant uptick in the labour force participation rate.This is similar to my post earlier this year: Why the Prime Labor Force Participation Rate has Declined. Rosenberg focused on the Boomers retiring, however I've argued there are other factors too (People staying in school longer and a slow, but steady decline in prime men participation). But our conclusions are the same: the participation rate has mostly declined due to structural factors, not cyclical. And the participation rate will continue to decline for the next decade or more.
So, once again, any mention of the participation rate — or alternatively, mentions of a participation rate-adjusted unemployment rate or anything else of along those lines — as an indicator of labour market slack or as an argument for why the unemployment rate is obsolete and should be ignored, especially in the context of the policy discussion.