The unemployment rate is not always the best way to look at the economy since it doesn’t include workers who have dropped out of the labour force. Instead, analysts often use the employment-to-population ratio or the labour force participation rate.
But those numbers can be deceiving too since they can mask whether changes are driven by a weak recovery or demographic changes. Even without the recession, the employment-to-population ratio and labour force participation rate were both likely to fall as baby boomers retire. Thus, we shouldn’t expect either to return to the pre-recession peak so comparing them to that is a bad way to grade the recovery.
Today, Calculated Risk posts a graph that looks at the employment-to-population ratio and participation rate for workers aged 25 to 54. Unlike those rates for the entire population, the employment ratio and participation rate for those workers should return to their pre-recession levels. There isn’t any reason that a smaller share of workers aged 25-54 should be working.
Unfortunately, the graph shows that we still have a long way to go: