Replies

Steve Forbes is a radical liberal known for carrying Obama's water right?

From Forbes:

Baby Boomers, Not Recession, Behind Drop In Workforce

To hear most economists tell it, the prolonged recession has caused millions of Americans to leave the labor force. retirement

Perhaps though there’s another story there. Maybe it’s just the baby boomers.

Baby boomers, the generation born between 1946 and 1964, started reaching the conventional retirement age, 65, last year. That would certainly have many of them leaving their jobs and heading toward the doors. It’s their exit from the labor force that could explain why the labor-force participation rate has fallen from 66% at the end of 2007 to near 63.9% today, a group of Barclays Capital economists argue in a new report.

Just how can baby boomers afford to retire?

Well, the average American is just that: average. He or she belongs to Middle America. They’re mostly reliant on Social Security in their golden years, and don’t have a lot tied up in the equities market, the Barclays Capital economists say. These folks weren’t that badly hurt by the wild swings over the past couple years—where financials like Goldman Sachs and JPMorgan Chase have only recently rallied. And they probably aren’t chasing the next hot tech stocks either. Looking at you, Zynga. (Although a smattering of Apple in any portfolio wouldn’t hurt these days.)

“Clearly, some households are likely not living as well in retirement as they would have if asset prices had continued to make new highs every year or the labor market had not weakened, and the drop in wealth has likely delayed retirement for some households,” the economists, Dean Maki, Troy Davig and Peter Newland, write.

According to the report, just a third of the drop in labor force participation came from those who still wanted a job—and only 15% of those folks are of prime working age, 25 to 54. So, the economists see “the possibility of a large and sudden return of previously discouraged job seekers to the labor force as remote.”

This would be good for the bearish holdouts on the economic recovery.

Those skeptics say the dropping unemployment rate mostly is from a drop in able-bodied people quitting the job search (and lowering labor force participation). And, they say, when the economy does pick back up, those folks will want back in. So, when they re-enter, the falling unemployment becomes the rising unemployment rate.

But if the Barclays economists are right, and the labor-force participation decrease is from baby boomers retiring, then we won’t see a large increase in labor force participation later. Or a rise in the unemployment rate.