It came as quite a disappointment last Friday when the Labor Department announced that the U.S. economy created only 142,000 net jobs in August. Even worse, this anemic number came with a downward revision of a combined net 28,000 jobs for the previous two months.
Now add to these a third unwelcome piece of news: The U.S. labor force participation rate — that is, the share of working-age Americans who are either working or seeking work — has returned to a multi-decade low of 62.8 percent, down from 65.9 percent before the recession. This number, which has been in a nosedive ever since the 2008 recession began, remains mired at levels that haven’t been seen since women began entering the workforce in large numbers. Fewer Americans are in the labor market today than at any point since 1978.
If that isn’t bad enough, keep reading. A few days earlier, the non-partisan Congressional Budget Office had released a new report projecting that labor force participation has not hit bottom yet. The number will continue to fall for another ten years until it reaches just 61 percent in 2024 — which by that time would be a 50-year low.
In other words, CBO expects a full decade in which the share of working Americans gradually declines further below its historically low post-recession levels. The ramifications are enormous for the economy itself, not to mention the government programs their tax dollars must fund.
CBO attributes the declining rate to several factors, not all of which are unexpected. For example, the biggest share of the decline will be related to the retirement of the Baby Boom generation with its increased life-expectancy.
But CBO also cites other reasons for the shrinking labor force. One was that “the recession and slow recovery will have lingering negative effects on the economy,” contributing to persistently slow growth and adding half a percentage point to the labor participation decline. Another factor was “the structure of the tax code — in which rising income pushes some people into higher tax brackets.”
The report also cites President Obama‘s health care law. Aside from whatever number of jobs it strangles in the crib, Obamacare will (as the White House once put it) liberate more Americans from “job-lock,” as government subsidies to purchase insurance reduce Americans’ incentives work as many hours. This, CBO calculates, will add a full percentage-point to the decline.
The report also mentions, in a different context, the persistently and unusually high number of people working part-time because full-time work is not available. CBO draws no conclusions from this, but part or all of this anomaly could already be a consequence of employers (especially local governments) preparing themselves for the now-delayed employer mandate.
President Obama did not cause the 2008 recession. But six years into his presidency, it is a fair question whether his policies, which also include government suppression of market-based coal and pipeline jobs, have not made America’s economic slowdown unnecessarily long and severe.
