Given the relatively modest pace of job growth in recent years, this has caused speculation that weak labour markets are causing workers to become discouraged and give up their job search.
But an RBC Economics report argues that there is little data to support the claim that unusual levels of worker discouragement are major factors in the declines in labour force participation or the unemployment rate.
The more likely explanation for the decline in the participation rate—the percentage of the population 15 and over that is either working or actively looking for work—is that the longer-term demographic factors lie behind the recent downward trend.
The rate continued to decline in April, falling to 66.1% from 66.2% in March and further below the 66.5% rate a year earlier. This is a trend that has prevailed since hitting a pre-recession peak of 67.8% in February 2008.
“The most important factor appears to have been the aging of the baby boom generation and the resulting increase in the number of worker retirements,” says the report. “Most of the increase in the population not in the labour force since October 2008 has been concentrated those aged 65 years of age and over.”
This likely entails a sizable number of individuals retiring from the workforce. The total number of people age 15 and up classified as not in the labour force has risen by more than one million from October 2008 to April 2014.
The report notes that most of that increase (about 682,000) was in the population 65 years of age and over.
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