Silver Lining From This Morning's Employment Situation Report

Once again, much of the focus on today’s employment situation report fell on the participation rate, which tumbled to 62.6 percent, the lowest since the late 1970s. However, a closer look at the numbers reveals that for the two-thirds of the civilian labor force in their prime working years of 25 to 54, the participation rate is only 4.0 percentage points off of historic highs reached in dot.com heydays.

The overall participation rate is being dragged down by the remaining one-third of workers who are either embarking on their working career or in its home stretch.

The latest data from the Bureau of Labor Statistics indicate that the participation rate among the nation’s 25- to 54-year-olds was 80.8 percent in June. That is indeed lower than previous highs, but nowhere near the lows of the late 1940s to early 1950s, when the participation rate for this age group ranged between 64 percent and 68 percent. The fact is that the current participation rate is less than four points below the historic high of 84.6 percent, recorded in January 1999.

Meanwhile, the participation rate among those 55 and older stood at 40 percent in June, which is helping to pull down the overall average. Interestingly, while the participation rate among older workers is half that of those 24 to 54, it is actually near the highest level since the late 1960s.

The other age group weighing down the average participation rate is the 16- to 19-year-old cohort. Workforce participation among teenagers is at a near-record low of 34.3 percent. The participation rate among teens has been declining steadily since the late 1970s. The decline tends to accelerate during recessions, but economic conditions appear to be playing a minor role in the trend.

“A number of factors are contributing to the decline of teen participation. Part of it may be fewer job opportunities. Since the late 1970s, we have moved from being a manufacturing-based economy to a service-based economy. Many of those who might have once found jobs in manufacturing are instead turning toward retail, food service, and other customer-facing occupations that were, at one time, the realm of teenagers,” said John A. Challenger, chief executive officer of global outplacement consultancy Challenger, Gray & Christmas, Inc.

In addition to a perceived lack of opportunities, data suggests that many teenagers simply are not interested in working, at least in the traditional sense. The number of teenagers not in the labor force has been on the rise for many years, but the number not in the labor who say they would like a job has remained level.

“Today’s teenagers are not lazy. Far from it. They are seeking more educational opportunities throughout the year, volunteering more and working odd jobs that fall under the radar when it comes to employment measurements. While some of these odd jobs include babysitting and lawn mowing, there are a growing number of teens designing mobile apps, selling items on eBay, or participating in online surveys that pay participants,” said Challenger.

“So, while the participation rate is indeed at its lowest level since the 1970s, it is important to understand why. Most of the decline can be attributed to record low rates among teenagers. Meanwhile, more than 80 percent of the nation’s approximately 125.1 million 25- to 54-year-olds are working or actively looking for work, which is not far below historic highs."