The Incredible Shrinking Workforce

Headline from the Seattle Times last week: Encouraging Job Numbers*. Yes, there were more new jobs created in July than in June, but this is a bit like getting excited that the Mariners scored more runs yesterday than they did the day before. Neither observation addresses the underlying nature of what's really happening.

In July, the labor force participation rate fell to 63.7%. Over the last twelve years this rate has been dropping steadily . What do you do when you drop out of the labor force? One way or the other you live off the produce of those who are still working.

You simply cannot have a growth economy based on fewer people working and more people not working.  And it not likely that government practices which penalize people who work in order to subsidize people who don't will turn that trend around. This is not something that can be cured with a stimulus bill or a temporary reduction in payroll taxes or even a change of administrations. This is something that requires a fundamental change in economic thinking.

* Do you remember what the headline was in July, 2008 when unemployment ticked up to 5.7%?