Courtesy of Mish.
A November Fed study on the Causes of Declines in the Labor Force Participation Rate by Shigeru Fujita at the Federal Reserve Bank of Philadelphia concludes “The decline in the participation rate in the last one-and-a-half years (when the unemployment rate declined faster than expected) is entirely due to retirement.“
Fujita based that statement on BLS surveys that look at the underlying reasons people give for nonparticipation.
The CPS divides nonparticipants into three broad categories: disabled, retired, and others. The last category includes nonparticipation due to “discouragement.”
Based on respondents’ reasons for nonparticipation, weighted by age group, Fujita produced this chart (trendlines in red by me).
Nonparticipation Rates by Reason
I do not doubt for one second the chart represents responses given to the BLS. But is there any evidence the answers given to the BLS are correct?
Let’s explore the question in a series of step-by-step charts.
First a chart by Doug Short at Advisor Perspectives that shows participation rates of various age groups.
Age 50 and Older Participation Rates
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