If you judge by the unemployment rate, America's labor market seems pretty healthy. Today the Labor Department released new statistics showing that just 5.1 percent of Americans are unemployed. That's unchanged from the previous month and down from more than 10 percent in the depths of the last recession.
But the unemployment rate tells an incomplete story about the state of the labor market. It counts the number of people who are out actively looking for work and not finding it. But it does not include people who — for whatever reason — are not looking for work at all.
But another statistic, the labor force participation rate, gives a comprehensive sense for how many people are working. It shows the fraction of the population over age 16 that is working. And today we learned that this statistic fell to 62.4 percent — the lowest level since 1977.
One big factor driving this trend is that the American population is getting older, and older workers are less likely to be in the workforce. At the same time, the share of "prime age" adults — those between 25 and 54 — in the workforce has also been falling since the late 1990s.
The declining labor force participation represents a long-term trend that goes beyond the most recent recession. The LFPR rose in the 1970s and '80s because a lot of women were entering the workforce. But that trend has run its course, and as the US becomes a wealthier and older society, fewer and fewer of us are employed.