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A Persistent Lie

There’s a persistent lie making its way through popular media- and often twisted through social media. Like any good lie it starts with a kernel of truth but gradually becomes a clear and open lie.

The truth – the labor force participation rate is at a 40 year low, down to 63% from a high over 67%.
The lie – that this is the result of people giving up looking for work, a sign that the “recovery” is weak (which can be blamed on President Obama).

We’ve discussed this before, but it’s important to confront the lie as clearly as possible. Yes, the labor force is shrinking – but this has been due to retirement of Baby Boomers for the last two year. And yes, the trend will continue. More importantly, this is an opportunity that will help us when the dust finally settles on the working careers of the Baby Boom.

First we need a statement of the truth, and it is shown clearly in this graph. The percentage of people in the civilian labor force (those over 16 who are not in jail or another institution, which is to say capable of working) who have a job is dropping rapidly:

Civpart48-13

By taking these data back to 1948 you can see the rise of the Baby Boom that got us to a high participation rate as they entered the workforce in large numbers starting in 1965 – but the chart doesn’t take off until 1968. It levels off in the 1990s once that generation was absorbed and then starts to fall off in waves with the start of the current depression in 2000.

That’s the truth, the reality. The lie is that this is a new thing.

The lie starts through implication more than direct falsehood. “This Obama economy is holding people back. The workforce participation rate is the lowest that it’s been in 40 years,” according to Rep. Lynn Jenkins of Kansas. There is one sentence of clear fact following a statement of supposition and politics. They don’t belong together.

Take it from the Philadelphia Federal Reserve, which published the most complete paper on the topic on 19 November 2013:

The decline in the participation rate since the first quarter of 2012 is entirely accounted for by increases in nonparticipation due to retirement.

In 1947 the Baby Boom started – 3.9M kids were born, versus only 2.8M at most for any year during the war. They turned 65 years old in 2012, and many of them who had been working retired. This will accelerate as we hit the peak years of the Baby Boom – from 1952 to 1957 3.9M-4.3M were born every year. As they retire, jobs are opening up for the next generation and things should change dramatically once they are 65 in 2017.

That doesn’t explain the entire graph, of course. The Philadelphia Fed saw what happened in 2000:

Between the first quarter of 2000 and the second quarter of 2013, the participation rate declined 3.9 percentage points. Roughly 65 percent of the decline is accounted for by retirement and disability. The increase in nonparticipation due to retirement has occurred only after 2010, while nonparticipation due to disability has been steadily increasing over the last 13 years, except for the last few years.

This is best shown in the graph from the same report, showing the reason for leaving the workforce by year:

reasonforleaving

Disability rises constantly, which may be explained by the aging workforce ahead of being eligible for retirement. But the category “other” – including becoming a full-time student, parent, or just a bum – rises at first and then levels off after 2010. It’s not about people leaving the workforce because they can’t find a job.

That means that you can’t blame Obama for it.

There are articles that lean heavily towards the lie and insist that this has to be Obama’s fault. Most do not directly lie, but people linking to the articles on various social media sites get the message – people can’t find work and don’t count anymore, right? No, that’s not right. But it’s clearly the message that is actively being spread as the economy generally rebounds slowly.

Where did this persistent lie come from? Rush Limbaugh is trying to take credit for first floating the declining workforce participation in February 2011, and that seems to be the earliest reference. He may be the origin of this lie.

That’s not to say that with the 4M jobs created in the last two years all is rosy. Barataria has been focused carefully on the unemployment rate among 20-24 year olds, which has declined from 14% to 11% in the last two years. That’s still terribly high, but it’s easily explained. Youth unemployment is a problem throughout the developed world, running as high as 50% in Spain and Greece. Job growth has come largely at small to medium companies who are looking for experience to fill very specific needs – something not easily filled by a kid right out of college. But more importantly, the decline in manufacturing jobs has been devastating since 2000, declining as much as 1/3 of the total jobs before weakly recovering:

manemp2000

The 5.4M manufacturing jobs lost between 2000-2010 are important, because they are good jobs for people right out of high school with few skills. Often, they pay people to learn on the job and rise through the ranks as they become more skilled. They are a great opportunity for many young people who don’t yet know what they want to do. Losing these jobs has been devastating – and a defining feature of our economy since 2000.

There is a big problem, and it long predates both Obama and Bush. It’s an economic cycle, a particularly destructive one, that Barataria calls “The Managed Depression”.

Restructuring an economy takes time after a depression, given that there has to be new faith where opportunity has been missing for a long time. The euphemism “Great Recession” has only served to mask the depth of this problem, putting the focus on 2008 as the down year – which is far from when everything started. The economy is getting better and hope is returning – but slowly.

The lie that people are hopeless and giving up looking for work is not supported by the data. The truth is a lot more complicated, and it shows that we’ve all been lied to for a lot longer than timeline given by Rush Limbaugh for this particular lie. But it is a lie – the decline in workforce participation lately has been entirely due to the retirement of aging Baby Boomers, and the losses before that are deeply troubling and point to an underlying weakness decades in the making.

Please help stop this terrible lie from circulating. Thank you.

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27 thoughts on “A Persistent Lie

    • Thanks. I didn’t want to have to be explicit, but the lie seems to be accelerating – despite a few good articles explaining it. The problem is that the articles so far do not account for the first part of the decline, largely because it requires an understanding of the downturn since 2000.

  1. I think the word “lie” is overstated. There does seem to be a deliberate misinformation campaign but you gave no evidence that anyone actually said “it’s all Obama’s fault”. Maybe I’m being too technical but it seems that they dance around it pretty carefully and avoid any kind of outright lie. If you could find one example where people have said that people are leaving the workforce that would be different.

    • Perhaps it is overstated, but I think there is a deliberate campaign here that is leading people to a wrong conclusion. To me, that’s a lie – even if it isn’t explicit. Certainly, by the time it’s repeated in blogs and so on it often becomes an outright lie, and that appears to be by design.
      I could not find one example of the outright lie in the mainstream media, no. There is a lot of talk about reduced confidence, which is utter hooey, IMHO. People are retiring … it’s pretty obvious. And in the last two years that’s been the story. They are leaving behind job openings that will be filled by young people. Mazeltov!

  2. Erik, I appreciate your thorough explanation of “The Lie.” It’s so hard to know what to believe, but you present a solid, well-researched look at the issue. THANKS for subscribing to TheDailyGraff.com. I hope I can bring you a smile (or at least a groan) every weekday.
    –John Robinson

  3. It is a lie! The republicans are trash talking the economy to make Obama look bad. I think it is like treason. They want to keep everyone down so they spread their lies that things aren’t getting better. It makes me so mad because when Bush was president they told everyone to keep shopping, nothing is wrong, pay no attention to 9/11. Remember that? And now that they want to win the next election they trash talk it down. It’s all lies to them, they don’t care.

    • It does seem to be a deliberate attempt to “talk down” the economy for political reasons, yes. I can never be sure of motivation so I don’t like to go there, but there is a consistent theme. And it’s sick.

  4. Things are not rosy in the US of A. This blog doesn’t tell the full truth. The Republicans have it more right than wrong. Maybe people are fine on Ramsey Hill, Cathedral Hill, and Higland Park. How about in Frogtown? How about on Lake Street?

    Bruce Springsteen, in the song Johnny 99, sang these lyrics,

    Well they closed down the auto plant in Mahwah late that month
    Ralph went out lookin’ for a job but he couldn’t find none
    He came home too drunk from mixin’Tanqueray and wine
    He got a gun shot a night clerk now they call’m Johnny 99

    Down in the part of town where when you hit a red light you don’t stop
    Johnny’s wavin’ his gun around and threatenin’ to blow his top
    When an off duty cop snuck up on him from behind
    Out in front of the Club Tip Top they slapped the cuffs on Johnny 99

    Well the city supplied a public defender but the judge was Mean John Brown
    He came into the courtroom and stared young Johnny down
    Well the evidence is clear gonna let the sentence son fit the crime
    Prison for 98 and a year and we’ll call it even Johnny 99…

    Those lyrics are timely.

    As of December 2013, 3.9 million Americans had been unemployed for 27 weeks or more.

    We are still in a depression, Mr. Hare.

  5. I’ll gladly drop the Mr. Sunshine handle for a moment.

    We are in a Depression. The last 5 years have been horrible for everyone, and many people have been in pain for a decade or more. And I don’t expect that we’ll really get out of it for at least 3 more years.

    But – there is some progress. If you don’t want to call that enough, that’s fine. You don’t really know that you’ve turned the corner until you can look back and see where it started to go right, but I think that 2013 will be that year. It’s not much, but it’s a start.

    What I hate more than just lying about the situation is the perpetuation of the whole framework that we have for understanding the situation. That is, people still talk about this as if it is a conventional postwar recession and everything should go somewhat like all the other recessions. That’s ludicrous. It’s a Depression and it requires different action. The wave of retirement is a double-edged sword, creating opportunities for young people while it increases demands on social services. We have to enter this period ahead with our eyes wide open.

    But we’re not. We’re fed lies that reinforce an utterly wrong way to look at the challenges we have.

    That leaves aside the ridiculous “blame game” where everyone wants to pin this on some leader past or present, as if policy made this world just the way it is. I’ve done some of that, too, and it ultimately made no sense at all. The origin of this lie is a deep need to blame Obama, which is totally ridiculous. And you can’t blame GW Bush or Reagan, either.

    Want a song lyric? Try Margaritaville – “Some people claim that there’s a woman to blame, but I know – it’s nobody’s fault.”

  6. Doing different kinds of analysis and interpretation is good, in the sense that everybody can participate with statistics and arguments.

    Repeatedly telling us that you are good in predicting that 2017 is going to be a turning point , I think, is corrosive to Barataria. I think it is insulting to us that you think you are some sort of “seer.” What you really should do is also tell us why you think you could be wrong about 2017. That would be more honest.

    The thing you have criticized the finance industry is for thinking like a empty-headed herd.

    The sad thing is that trillions of economic decisions are being made around the world, because people in the media and internet are saying “things appear to be getting better.”
    That is how we get into financial calamities.

    • Predictions are nothing more than a desperate cry for attention – and the way the ‘net is today it’s a requirement. I won’t necessarily say that I’m doing the self-promotion part adequately – hell, I’m sure I’m doing something wrong – but you have to do that to get some kind of gig these days. It’s not really my idea.
      So I’ll keep at it, although your suggestion is still a good one. The most likely way it would fail is any kind of emergency caused by another financial meltdown. While the system isn’t as fragile as it was in 2008 on paper, JP Morgan is probably has a lot more risk than we know. So that would be the top cause for concern, for sure.
      It also appears that budget battles are bad for the economy, so a really big, long shutdown could kill things off.
      But as for things getting better – they are. We had a good holiday retail season – except it didn’t register in the old-line retail and instead went to smaller and online-only outlets. It’s all changing very rapid, everything. And it’s really hard to take advantage of what improvements we have.
      So … what do we have … all this is the way it is because of requirements of the internet. So perhaps you should compare me to Hitler if you wanna be all internetty about things. I am a dog owner, so I have that in common with the guy. And floppy straight hair that hangs down funny. I’m soooo much like Hitler. 🙂

    • First of all, I never claimed to be an oracle, so criticizing me for not being one is pretty silly.

      Second of all, that is one of the topics I have been harping on for a year now. Young people are opting to stay in school and are NOT finding jobs. There is a discussion of this above with a lot of links. It IS a serious problem and deserves a lot more attention. I’m glad Bloomberg is focusing on it because it’s been largely ignored for far too long.

      Third, given that this IP is in Las Vegas, I’ll just assume you are Smithson continuing to stalk me and change names randomly. That’s not only rude, it’s really creepy. Please stop.

    • BTW, this is a very good article and I do recommend it. The primary difference between their analysis and that done by the Philly Fed is that they looked at the last 4 years exclusively, whereas Philly noted that retirement accounts for the changes in just the last 2 years. Both are consistent with each other – 2010 and 2011 were terrible years by any measure.
      However, the decline in workforce participation listed continues, meaning that the rate of people staying in school or other reasons is still important, as noted. The turnaround is weak. There is fodder there for Republicans after all! But with 4.1M jobs created in the last two years and about 2M retiring (more or less – we don’t know for sure) there are more openings – and the labor participation rate should improve for those under retirement age. But as of today it remains a bad job market for young people even with a small turnaround.

  7. Note: A piece at Forbes takes on the pick-up of this piece at MinnPost: http://www.forbes.com/sites/realspin/2014/01/15/u-s-unemployment-retirees-are-not-the-labor-exodus-problem/
    I like this piece, actually, because it goes to my main point that the decline in labor force participation started in 2000, which is to say when this depression started. Unfortunately, it ignored my main contention that the last 2 years have been different (and thus none of this can be blamed on Obama). But aside from that, we’re getting at some discussion of the economy that takes a longer view, realizing that 2000 was the turning point. This is only a good thing.

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