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Home Publications Blogs Beat the Press Good Story in U.S. Job Market Depends Largely on Ignoring People Who Drop Out of the Labor Force

Good Story in U.S. Job Market Depends Largely on Ignoring People Who Drop Out of the Labor Force

Wednesday, 03 September 2014 14:45

Wonkblog had a post telling readers that the U.S. labor market is doing better in the recovery than the labor market in most other wealthy countries.  While this is true if we look at unemployment rates, is far less clear if the focus is employment rates (EPOP), the percentage of the population who is working.

This is true even we control for demographics. The EPOP for prime age men (ages 25-54) in the United States is still down 3.7 percentage points from its pre-recession level. By comparison, in Japan the EPOP for prime age men is up by 2.0 percentage points and in Germany it's up by 3.3 percentage points. 

France has seen a drop in its EPOP from pre-recession levels, but only 0.7 percentage points -- still much better than the U.S. In fact, with a drop of in its EPOP for prime age men of 2.7 percentage points, the euro zone as a whole is doing better than the United States, in spite of the inclusion of crisis countries like Spain and Greece with double-digit drops in EPOPS.

In short, the case that the U.S. labor market has fared better than the labor markets in most other wealthy countries is much weaker than this piece indicates.


Thanks to Seth Ackerman for calling this one to my attention.

Comments (8)Add Comment
..., Low-rated comment [Show]
Cool beans, Vedi
written by ifthethunderdontgetya™³²®©, September 03, 2014 3:46
Are they retiring by choice?

Prime age?
written by Nick Batzdorf, September 03, 2014 3:51
As a man who used to be 54 and is now very much at the top of his game, I'm always curious why economists like to use 54 as the cut-off for "prime age."

What's more, I don't know that I'd hire myself when I was 25! I didn't know anything and was very immature by comparison.
cutoffs based on when most people work
written by Dean, September 03, 2014 5:22

the years for prime age are determined by when workers have the highest employment rates, it has nothing to do with economists' judgements as to whether they are good workers.
If you ignore the unemployed, the unemployment rate does not exist at all!
written by Some guy, September 03, 2014 6:24
Heck, the Conference Board says that we're going to have a labor shortage soon!


Think about it, all one has to do is automatically exclude long-term unemployed and missing workers, assume that 65 year olds (can afford to) retire, underestimate H1B, offshoring, immigration reform/illegals working, ignore wages not rising, assume no workforce training, ignore HR matching inefficiencies. and presume that the at the economy isn't stagnant, and soon there will be a major labor shortage!
written by urban legend, September 03, 2014 9:31
Vedi wants to hide from the reality that 54 year olds and younger do not retire by choice.
Participation rate.
written by Ralph Musgrave, September 04, 2014 4:12

The labour market participation rate (i.e. the proportion of working age people in work or seeking it) actually started to drop BEFORE the recent crisis. So possibly this is a long term trend.
cutoffs based on when most people work
written by Nick Batzdorf, September 05, 2014 2:07
Aha. Thanks for explaining that! I've always wondered about it.

Yesterday Paul Krugman mentioned prime age during an internet-broadcast conversation with Elizabeth Warren - and wow is she impressive! - saying "Sorry, we're past our prime." Her response: "Speak for yourself, Buster!" [paraphrasing of course]


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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.