Does Early Retirement Explain the Decline in the Labor Force Participation Rate?

Many thanks to William Polley for a thoughtful post on the employment-population ratio. He follows up on my critique of the unemployment ratio – where its decline over the past couple of years is a combination of a weak recovery in employment relative to adult population and a fall in the civilian labor force participation rate. On the later, William notes two CBO reports, which have gone to the top of my read pile.

Update: The Bureau of Labor Statistics allows one to form customized tables of items such as labor force participation rates for various subsets of the labor force. A few Angrybear readers noted that the largest decline in labor force participation rates was for teenagers. The table below takes various age groups starting with the 16 to 24 year-old bracket and ending with the 55 and over bracket (mislabeled in my table) – and compares the group’s labor force participation rate as of 2000QIV and 2005 QI.



This data indicates two important things: (1) while the labor force participation rate did fall dramatically among those under 25, it actually rose for those 55 and over; and (2) labor force participation is rather low for the 55 and over group. The baby boomers generation has reached age 55 – and since the overall labor force participation rate is a weighted average of each group’s participation rate, William Polley’s point that we are about to experience a decline in the natural rate for the the labor force participation rate (my responsibility for this odd terminology) seems quite reasonable. Additional note, confession, and request: I had tried to get the customized tables to give the data for the 55-64 group and it would only give the 55 and over series. Anyone with better luck navigating the BLS tables?.

Update II: Many thanks to Donald Coffin who did have more luck with the BLS tables than I did. For the 55-64 year old group, labor force participation was 59.2% as of Dec. 2000 and 62.9% as of March 2005.