Lifted from an e-mail from Daniel Becker:
Compare Fujita’s conclusion from the Fed paper, here http://philadelphiafed.org/research-and-data/publications/research-rap/2013/on-the-causes-of-declines-in-the-labor-force-participation-rate.pdf#page=7, with da Costa’s description in the WSJ. da Costa, “Philly Fed economist Shigeru Fujita argues that the shrinking of the U.S. workforce over the past year and half was “entirely due to retirement” of baby boomers.” http://blogs.wsj.com/economics/2013/12/09/work-force-is-shrinking-because-of-retiring-boomers-philly-fed-paper-argues/
Apparently what Fujita concludes has gotten lost in da Costa’s translation, and both writings are in English. The WSJ staff don’t concern themselves with that. A word, phrase or sentence left out here and there can significantly change the originals author’s meaning and the details presented in the body of the original report are wholly misrepresented. That’s what slanted media can do to the public’s understanding of issues, especially when the data being presented is complex and a bit arcane in a layman’s vernacular.
Fujita’s conclusion:
CONCLUSION
Analyzing people’s reasons for not participating in the labor force provides a relatively
clear idea of the causes of declines in the labor force participation rate. The number of disabled
persons has been steadily rising; retirement had not played much of a role until around 2010, at
which point it started to make a large impact on the overall participation rate. In particular, 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.There is no question that more workers dropped out of the labor force due to
discouragement during and after the Great Recession and that there are more discouraged workers
now than before the recession. These facts clearly reflect the continued weakness of the U.S.
labor market. However, it is not clear whether the overall participation rate will increase any time
soon, given that the underlying downward trend due to retirement is likely to continue.
Several studies try to separate “cyclical” factors from “structural” factors when
explaining the behavior of the participation rate.13 However, the foregoing analysis casts some
doubt on the usefulness of such labeling. For example, the label “cyclical” often implies —
whether implicitly or explicitly — that declines in the participation rate explained by “cyclical”
factors will reverse as the economy improves. However, this presumption may not hold. In
particular, the decision to retire is clearly affected by cyclical factors, but this decision is unlikely
to be reversed.Lastly, unfortunately, I could not pin down an underlying cause of the increase in
nonparticipation among those who do not want a job. This appears to be an important area for
future research.