WASHINGTON — Declaring the Great Recession only partly to blame, White House economists say the increasing number of Americans dropping out of the labor force dampens economic growth and demands policy changes that create more job opportunities and add workers.
In a new report released Thursday, President Obama’s Council of Economic Advisers point to an aging population as the biggest single factor contributing to the lowest participation rate in 36 years. The report also says the elevated unemployment rate, which climbed to 10 percent in 2009, drove workers to put off looking for a job.
But they say other factors might be at play, including long-term declining rates for 24- to 54-year-old men and a more recent decline in the participation in the labor force by women.
The decline in the labor force – currently at 62.8 percent compared to a high of 67.3 percent in 2000 – has been one of the more baffling indicators to emerge during the economic recovery, clouding an otherwise improving jobs picture. The participation rate has declined even as companies have increased hiring and as the unemployment rate has declined.
Obama’s critics have often pointed to the number of Americans dropping out of the labor force as evidence that his economic policies aren’t working.
But Jason Furman, chairman of the Council of Economic Advisers, said a voluntarily retiring aging population and the trends showing a decline in participation by some workers precede the Great Recession that began in 2008.
“The participation rate is one of the most puzzling and misunderstood aspects of the economy,” Furman said.
Furman said the most effective response to a declining labor participation rate would be an overhaul of immigration laws that would increase the labor pool. The Congressional Budget Office has estimated that an immigration overhaul that passed in the Democratic-controlled Senate last year would add 6 million workers to the labor force by 2023. House Republicans have said they do not intend to vote on an immigration bill this year.
Furman said other Obama measures would help, including a higher minimum wage and a long-term, $302 billion transportation infrastructure plan.