“If you just give up and say, ‘Look I can’t go back to work, I’m just going to stay home,’ why, you’re no longer part of the employment statistics. So it looks like unemployment is getting better, but the truth is, if the same share of people were participating in the workforce today as on the day the president got elected, our unemployment rate would be around 11 percent.”
— Mitt Romney, Oct. 5, 2012
The announcement Friday that the unemployment rate had dropped below 8 percent deprived the Romney campaign of one its favorite talking points (“42 months of unemployment above 8 percent”). Never mind that this is more of a psychological barrier than anything else, since the rate has bounced around enough that it will take some time to see if this is a permanent shift.
But Romney was quick to point out a new figure — a suggestion that the real apples-to-apples unemployment rate with the start of Obama’s term would be 11 percent. We have previously explored the details of another unemployment rate — the U-6, which includes part-timers looking for full-time work — that conservatives have touted. But what is this new metric?
On the surface, Romney’s point seems reasonable. The labor force participation rate in January 2009 was 65.7, according to Bureau of Labor Statistics data. Had the rate remained the same, the labor force would be about 160,158,000. At the current employment level, the unemployment rate would be 10.7 percent.
But this assumes all things are equal in the labor force, when in fact it is constantly churning and evolving. In particular, besides the aftermath of the Great Recession, the composition of the labor force has been affected by the retirement of the leading edge of the Baby Boom generation.
Our colleagues at WonkBlog explored this issue earlier this year, showing that the peak of the labor force participation rate, or LFPR, was reached during the end of President Bill Clinton’s term and that since then it has been on a downward track. “If the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 11.1 percent,” the column noted. “If the percentage was where it was when George W. Bush took office, the unemployment rate would be 13.1 percent.”
The Federal Reserve Bank of Chicago in March estimated that just over half of the post-1999 decline in the labor force participation rate was explained by long-running demographic patterns, such as the retirement of the baby boomers. “These patterns are expected to continue, offsetting LFPR improvements due to economic recovery,” the study said.
In other words, all things did not remain equal.
The Pinocchio Test
Romney’s assertion is too facile to constitute sound economic analysis. He is certainly welcome to blame Obama for problems in the economy, but he can’t blame him for long-running demographic trends such as the retirement of the baby-boom generation. Romney needs to adjust his statistic to account for that fact.
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