Baby-boomer retirements are skewing the nation’s unemployment rate, but not enough to disguise a weak economy, according to a new report.
The left-leaning Economic Policy Institute (EPI) says the slow exit of baby boomers is a factor in the declining jobless rate, and its overall conclusion is that the economy is still quite sick.
The findings are important because they provide insight on why the unemployment rate has dropped from 9.1 percent to 8.1 in less than a year.
EPI’s report could become a talking point for the GOP in the messaging fight on the economy between President Obama and former Massachusetts Gov. Mitt Romney (R).
Republicans and EPI certainly don’t agree on much. For example, EPI has long argued that the government should embrace expansionary policies to generate more demand for workers. Republicans, at least in recent years, have strongly opposed government stimulus proposals.
EPI estimates only one-third of the drop in the national labor participation rate, which measures the share of working-age people who either have a job or are jobless but are actively seeking work, is related to baby-boomer retirements and other structural changes to the workforce.
If the rate is largely dropping because the weak market has made people give up searching for a job, it bolsters the Republican argument that Obama is presiding over an extraordinarily weak recovery and that the fall in the unemployment rate is basically a mirage.
What’s more, if the economy heats up, one could expect the unemployment rate to rise as people come back to the workforce.
However, if the drop in the rate has more to do with changing demographics, it would suggest the workforce is changing. Under this scenario, the rate is less likely to spike if the recovery heats up.