U.S. May jobs data showed a recovery of the total jobs lost in the recession of 2008, but also highlighted an alarming number of job drop outs for the May time period that is not only an isolated incident but a trend that does not seem to be slowing down anytime soon. Since December 2007, the total number of jobs is virtually unchanged, while the number of people not in the labor force has increased by 12.8 million (from 79.2 million) to a record 92 million.
We refer to the chart below showing the steady incline of people not in the labor force:
One may think that explaining the job drop out rate would be a complicated exercise focused on studying a variety of possible factors such tough labor markets, changing demographics and societal trends, a graying population (older people are less likely to work) and more young people going to college.
The real cause of the drop out increase is much simpler to explain than any of the above reasons. Bill McBride at Calculated Risk posts this chart of the Labor Force Participation Rate for prime-working aged men.
More context is provided by Business Insider:
As you can see, the decline in the Labor Force Participation Rate in this demographic has been declining for about four decades. It’s really hard to look at this chart, and think that the recession changed the story much. Obviously, there are other big trends (cultural, technological perhaps?) that are behind the decline in this demographic. And any explanation that doesn’t account for the multi-decade trend falls flat.
McBride notes that he made the chart men-only for the sake of simplicity: The basic idea, presumably, is that for most of the above time period up until recently, the Labor Force Participation Rate among women rose significantly for well-known cultural reasons. By isolating men you see there’s some other longstanding force out there that’s reducing the number of men who are inclined to work.