How much is Obama to blame for the worst labor participation rate in 40 years?


(Ty Wright/Bloomberg News)

“This Obama economy is holding people back. The workforce participation rate is the lowest that it’s been in 40 years.”

–Rep. Lynn Jenkins (R-Kan.), news conference, Jan. 8. 2014

“What we need the president to do is to say the Obama economy is not working. The labor force participation rate is the worst it has been in 40 years.”

–Rep. Marsha Blackburn (R-Tenn.), interview on MSNBC’s “Jansing & Company,” Jan. 7, 2014

When two lawmakers say virtually the same thing, one senses an emerging talking point.  In this case, both Rep. Jenkins and Rep. Blackburn slipped in mention of the labor force participation rate –“worst in 40 years”—after making a disparaging comment about the “Obama economy.”

These remarks were made in the context of the debate about extending long-term unemployment benefits to 1.3 million Americans. Republicans are skeptical of passing an extension, especially without offsetting the $6.4 billion price tag with cuts elsewhere.

Coincidentally or not, this focus on a relatively obscure data point comes as the more closely watched unemployment rate showed steady improvement in 2013.

So how much is the “Obama economy” responsible for the decline in the workforce participation rate?

The Facts

As of November, the Labor Department reports, 63 percent of Americans had a job or were actively seeking work. That’s the lowest level since April, 1978—nearly 36 years ago.

Okay, Jenkins and Blackburn rounded up a bit. But as a stand-alone factoid, the statement is basically correct. The key issue is the context—how relevant is this fact when discussing the travails of the “Obama economy?”

When Obama took office in January, 2009, the workforce participation rate was 65.7 percent. So there has certainly been a decline. But the rate had already been on a steady downward track since it hit a high of 67.3 percent in the last year of Bill Clinton’s presidency.

A key reason? The composition of the labor force has been affected by the retirement of the leading edge of the Baby Boom generation. (Our colleague Brad Plumer has written extensively on this issue.)

In the first five years of George W. Bush’s presidency, the rate fell 1.2 percentage points. (At the time, Democrats might have tried to claim that under the “Bush economy” the labor participation rate was “the worst in two decades.”) Five years into Obama’s presidency, the rate has fallen 2.7 percentage points.

So clearly the  decline has been faster under Obama, though again, demographic factors have played an important role.

The Federal Reserve Bank of Chicago in 2012 concluded that just over half of the post-1999 decline in the participation rate comes from the retirement of the baby boomers. Critically, the research showed that the problem is only going to get worse in the rest of the decade, with retirements accounting for two-thirds of the decline of participation rate by 2020. In other words, the rate will keep declining, no matter how well the economy does.

Barclays economists, meanwhile, say that just 15 percent of the drop in the labor force stems from people who want a job and are of prime working age (25-54). “We view the possibility of a large and sudden return of previously discouraged job seekers to the labor force as remote,” they wrote.

Of course, this does not let Obama entirely off the hook. As we noted, the rate of decline has increased in the Obama years, and analysts debate the reasons for that. The president inherited a recession, but various efforts to boost the economy, such as the stimulus bill, have been disappointing. Republicans suggest that the new health-care law also has been a drag on employment, though as we have noted, the evidence is still murky on that.

As Plumer pointed out, there are two key indicators that this is not just a demographic story: one, the number of Americans working or actively seeking work has actually fallen faster than demographers had predicted; and two, the participation rate for workers between ages 16 and 54 fell sharply during the recession and still hasn’t recovered.  Part of the reason for the latter may be that people are not entering the work force at the same rate, in part because they are spending more time getting an education.

More workers are also going on disability, our colleague Jim Tankerkey noted in an article that said the numbers have been a puzzle for economists. Until the mystery is unraveled, it’s hard to put all of the blame on the president.

“I don’t think anyone is trying to say the current labor-force participation rate is solely due to the president’s policies,” said Annie Dwyer, spokeswoman for Jenkins. She added that “it would be inaccurate to suggest the president’s economic policies have not played a role in the size of the labor force.”

“The numbers speak for themselves,” said Mike Reynard, a spokesman for Blackburn. “DOL’s graph shows a steady decline during President Obama’s time in office,” though he acknowledged demographic trends played a role.

The Pinocchio Test

This is one of those situations where an accurate fact is used in a situation that cries out for additional context. Neither Jenkins nor Blackburn directly linked the rate to Obama’s handling of the economy, but it was certainly implied by the way they referenced the statistic.

Pairing this factoid with the “Obama economy” suggests that the decline is due entirely to his management of the economy when in fact a) it reflects demographic trends that will only become more pronounced as baby boomers retire and b) the president did take office in the midst of the worst recession in a generation.

All either of these two lawmakers needed to do was acknowledge that other factors, beyond Obama’s control, are playing an important role in the decline. Otherwise, their phrasing represents a slightly misleading use of this fact.

One Pinocchio

 


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Glenn Kessler has reported on domestic and foreign policy for more than three decades. He would like your help in keeping an eye on public figures. Send him statements to fact check by emailing him, tweeting at him, or sending him a message on Facebook.
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