Federal Reserve Chair Janet Yellen talked about a lot of things during her six hours before the House Financial Services Committee this week.
In addition to talking about how economic growth has picked up and the unemployment rate has fallen by 1.5 percentage points under the Fed’s asset purchase policy, she also talked about how the recovery in the labor market is “far from complete.” Many people have been out of work for so long that companies may no longer wish to hire them, she noted, and too many people are working part-time because full-time work isn’t available.
“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market,” Yellen said.
One of these problems isn’t so much the number of people who are unemployed, but the people who have stopped looking for work.
It’s true that a lot of people who aren’t working actually don’t want to work — they’ve spent enough time on the job and have chosen to retire. Rep. Spencer Bachus (R-Ala.) referred to research showing that about 80 percent of the decline in labor force participation in the past two years is due to retirement. (The 66-year-old Bachus is retiring at the end of this term.)
Although it’s been 30 years since the labor force participation rate was as low as it was in January, the fact that the rate’s been falling isn’t news.
What is news is how much of the shrinking labor force is due to younger people working less while older people are working more. This trend is especially true for women, where a recent Labor Department report contains some pretty bleak projections.
Here’s one: By 2022, more than 35 percent of women in their late 60s who would normally have just retired will still be working, while barely more than one in four teenage girls is projected to be working at that time. A generation earlier, one out of every two teenage girls had a job while only one of every six women in their late 60s did. (Much of the decline in teenage workers is because girls are now going to college. Just 13.4 percent of women age 25 and over had a college degree or more in 1981, while 31.4 percent had reached that level last year — that’s a development we want to encourage.)
In a sign of how the labor market has gone topsy-turvy, women who are at least 75 years old are projected to have the fastest rate of growth in the work force so that in 2022 more than 1.1 million will be working, up from just half a million in 2012. More than one of every four women aged age 65 to 74 — that’s about 5.2 million baby boomers — will be working in 2022.
There’s more bleak news. Although we now expect teens to be in school, we don’t expect women from age 25 to 44 to stop working. Yet, every group of women under age 45 is projected to have a lower labor force participation rate in 2022 than in 2012.
Why are younger women dropping out of the labor force while older women are working harder than ever?
Those are good questions for Yellen, and ones that will require some creative thinking. In her opening statement at Tuesday’s hearing, Rep. Maxine Waters (D-Calif.) said that Yellen’s “willingness to think outside the box is more important than ever.”
The sluggishness in the labor market creates a challenge for America’s first female leader of the Fed. While Yellen shouldn’t focus too much attention on the labor force woes of women, we do expect her to address the employment travails of the elderly because it seems wrong that grandma and grandpa may have to keep on working to support their grandchildren who still can’t find a job.