Amer­i­ca had a bad week. We once again were remind­ed that ter­ror­ism rep­re­sents a con­tin­u­ing threat, that indi­vid­u­als poi­soned by hate­ful ide­ol­o­gy can inflict great harm. We were also remind­ed that we are capa­ble of respond­ing to these bru­tal acts, as Pres­i­dent Oba­ma said, “Self­less­ly. Com­pas­sion­ate­ly. And unafraid.”

Ter­ror­ism presents a chal­lenge to which we’ve yet to for­mu­late a durable response. We remain vul­ner­a­ble, despite the government’s con­tin­ued efforts to keep us safe.

There is anoth­er prob­lem, less hor­rif­ic in its imme­di­ate effects but no less intractable, that also is get­ting the bet­ter of us: the prob­lem of job­less­ness. What’s hap­pened over the past sev­er­al years is per­plex­ing. It’s true that the unem­ploy­ment rate – the per­cent­age of work­ing-aged peo­ple who are seek­ing work, but can’t find it – has edged down ever so slow­ly, from 10 per­cent in Octo­ber 2009 to 7.6 per­cent last month. That rate is still too high; we’ve not seen unem­ploy­ment stay above 7 per­cent for so long since the Great Depres­sion. But it is at least mov­ing in the right direction.

What’s trou­bling is that the num­ber of peo­ple who have giv­en up on find­ing a job has increased at an alarm­ing rate over the past few years. The result is that the work­force par­tic­i­pa­tion rate – the per­cent­age of work­ing-aged peo­ple who have a job or are look­ing for one – is at a 30-year low. This chart, from the Fed­er­al Reserve Bank of St. Louis, using data from the Bureau of Labor Sta­tis­tics (BLS), illus­trates the trend:

The chart shows that the per­cent­age of peo­ple in the work­force climbed steadi­ly for near­ly four decades, from the mid-1960s through the turn of the cen­tu­ry, exceed­ing 67 per­cent for the first time in 1997. From that point on, it plateaued, before drop­ping to 66 per­cent in Feb­ru­ary 2004. It hov­ered around that lev­el until Octo­ber 2008, when it began drop­ping pre­cip­i­tous­ly. As of last month, it stood at 63.3 per­cent, its low­est since May 1979, accord­ing to the BLS.

Econ­o­mists have groped for expla­na­tions. The most obvi­ous would be that the baby boom pop­u­la­tion is mov­ing into its retire­ment years and leav­ing the work­force. If that were the case, we would expect that the par­tic­i­pa­tion rate of peo­ple over 54 would be plum­met­ing. It is not.

 

In fact, the tra­jec­to­ry of this curve is almost the exact oppo­site of what we saw in the chart of over­all work­force par­tic­i­pa­tion rates. The per­cent­age of peo­ple over 55 in the work­force is the high­est it’s been since the ear­ly 1960s. It began its rise from under 30 per­cent to over 40 per­cent dur­ing the ear­ly 1990s and is high­er today than it was before the Great Reces­sion. The per­cent­age of old­er work­ers par­tic­i­pat­ing in the job mar­ket actu­al­ly has grown since 2007, the oppo­site of what’s hap­pened with the over­all rate.

So if old­er work­ers are more like­ly to have jobs or active­ly seek them, per­haps the decline in work­force par­tic­i­pa­tion is attrib­ut­able to few­er younger work­ers. As with old­er work­ers, there is a good deal of anec­do­tal evi­dence about young peo­ple delay­ing their entry into the labor force. Per­haps that is what has caused the steep down­turn since 2007.

 

The work­force par­tic­i­pa­tion rate among 20–24 year-olds peaked in the mid-1980s at near­ly 80 per­cent. Last month, it reached a 40-year low of 70.1 per­cent. So it prob­a­bly is the case that younger peo­ple are help­ing to depress work­force par­tic­i­pa­tion rates by delay­ing their entry into the job mar­ket. That said, this is a rel­a­tive­ly small group of peo­ple, rep­re­sent­ing only 5 age cohorts. While their low­er par­tic­i­pa­tion cer­tain­ly affects over­all rates, they can’t alone account for the decline we saw in the first chart.

And that brings us to the core of the labor force, peo­ple aged 25–54. This is by far the largest group we’ve looked at. It’s also the most steady. Young peo­ple might delay get­ting a job by stay­ing in school or liv­ing with their par­ents. Old­er work­ers who despair of find­ing work may retire, per­haps qual­i­fy­ing for dis­abil­i­ty ben­e­fits under Social Secu­ri­ty. But peo­ple aged 25–54 are at the prime of their work­ing years. If the par­tic­i­pa­tion rate in this cohort is falling, that is much hard­er to explain or dis­miss. Unfor­tu­nate­ly, it is declin­ing.

 

Grant­ed, that decline is not as dra­mat­ic as the one we saw in the first chart, but it is sig­nif­i­cant and mim­ics the trend in the over­all par­tic­i­pa­tion rate that began around the turn of the cen­tu­ry. The 81.1 per­cent rate is the low­est since Decem­ber 1984 and sub­stan­tial­ly below its April 2000 peak of 84.4 per­cent. Because this group is so large, even declines of a few per­cent­age points strong­ly affect the over­all numbers.

We’ve reached a point where near­ly one in five peo­ple in their prime work­ing years nei­ther has a job nor is both­er­ing to seek one. It’s one thing for a young per­son to put off a job search or for an old­er one to give up on find­ing work. It’s quite anoth­er for peo­ple in their prime earn­ing years to drop out of the labor force. That the par­tic­i­pa­tion rate con­tin­ues to sink four years after the Great Reces­sion end­ed sug­gests that the jobs prob­lem isn’t entire­ly cycli­cal. The plunge in work­force par­tic­i­pa­tion has per­sist­ed despite a tepid recov­ery and a boom­ing stock market.

That plunge is also respon­si­ble for the mild­ly bet­ter news on the unem­ploy­ment rate that I men­tioned ear­li­er, since peo­ple who aren’t look­ing for work don’t fig­ure in its com­pu­ta­tion. In cal­cu­lat­ing the unem­ploy­ment rate, the BLS divides the num­ber of unem­ployed job seek­ers by the total num­ber of work­ers and those look­ing for work. Peo­ple who have dropped out of the labor force and are no longer hunt­ing for a job are exclud­ed from the cal­cu­la­tion. It is as if they don’t exist.

If our work­force par­tic­i­pa­tion rate were at its Novem­ber 2007 lev­el of 66.1 per­cent, there would be near­ly 7 mil­lion more peo­ple count­ed as unem­ployed. That would raise the March 2013 unem­ploy­ment rate from its report­ed lev­el of 7.6 per­cent to 11.5 per­cent, by my cal­cu­la­tion, using BLS data.

Let me stip­u­late that I blame this nei­ther on Pres­i­dent Oba­ma nor on Pres­i­dent Bush. The prob­lem we face seems to me to be much larg­er than any one per­son, or any two peo­ple, could cre­ate. I also reject the notion that the gov­ern­ment has been indif­fer­ent to this prob­lem. Pres­i­dent Oba­ma has run up mas­sive deficits in part on the the­o­ry that increased gov­ern­ment spend­ing, financed by debt rather than tax­es, would stim­u­late eco­nom­ic growth and job cre­ation. Over this same peri­od of time, the Fed­er­al Reserve has embarked on an unprece­dent­ed series of actions, pump­ing tril­lions of dol­lars into pri­vate banks. The the­o­ry is that the banks would, in turn, extend cheap cred­it to busi­ness­es and fam­i­lies, prompt­ing indi­vid­u­als to spend more mon­ey and busi­ness­es to hire more workers.

The issue isn’t lack of effort; it’s lack of suc­cess or even of an expla­na­tion for why noth­ing seems to have worked to this point.

We were remind­ed again last week that we are not safe from ter­ror­ism.  That reminder came in the form of sud­den explo­sions, plumes of smoke, the faces of vic­tims and their griev­ing fam­i­lies, of man­hunts, shootouts and acts of hero­ism and courage.

Reminders of our shrink­ing work­force are more pro­sa­ic — num­bers drawn from sur­veys, tab­u­lat­ed and ana­lyzed by gov­ern­ment econ­o­mists.  The images are far less stark but their impli­ca­tions are no less portentous.