South By North Strategies, Ltd.

The Economist looks at the troubling trends behind recent drops in the unemployment rate.

Not only is the population growing more slowly, the share of it in the labour force (that is, either working or looking for work), known as the participation rate, has also fallen. That rate commonly falls during recessions when some of the unemployed give up the search, go back to universities or training colleges or retire early. The decline usually reverses during recovery. Not this time: since the recession ended in mid-2009, the participation rate has kept on sliding (see chart). It has fallen most among the young, many of whom have stayed in education, and least among those over 55.
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Most striking has been the drop for men aged 25-54, who have long had the highest participation rates. Some of these men will re-enter the labour market when the economy and job opportunities revive, but many will not. The participation rate of men has been declining for years, apparently because many who lost their high-paid, low-skilled jobs in manufacturing, transport and construction have retired or registered as disabled rather than retraining. Julia Coronado, an economist at BNP Paribas, reckons a wave of early retirements by state- and local-government staff and manufacturing workers may explain the latest downturn. If these men never rejoin the job hunt, it would, paradoxically, help to bring the unemployment rate down faster. That might look like good news; but it is not.