Just the Facts: Demographic and Cross-Country Dimensions of the Employment Slump

Abstract

We present data characterizing the U.S. labor market during the Great Recession and subsequent recovery. U.S. employment declines were dramatic among young adults, substantial among prime-aged adults, and modest among those near retirement. The decline in employment among working-age adults generally exceeded those that occurred in other advanced economies. We assess the potential explanatory power of population aging and increases in educational attainment as factors underlying these developments. Recent analyses suggest that population aging can explain nearly one half of the decline in the labor force participation rate and one third of the decline in the employment to population ratio from 2007 to 2013. Our comparisons of employment developments across age groups and countries provide reason to view this one third as an upper bound on aging's plausible contribution. We conduct a more detailed analysis of changes in employment and school attendance across demographic sub-groups of the young adult population. Across sub-groups defined by age, gender, and race/ethnicity, changes in school enrollment predict very little of the variation in this period's employment changes. Taken together, aging and enrollment trends thus appear to underlie a modest to moderate fraction of the aggregate employment decline. We conclude by discussing a range of non-demographic factors that may have contributed to the decline, but on which existing research has yet to arrive at a consensus.

Keywords: Great Recession, Employment Rate, Unemployment, Labor Force Participation

JEL Classification: E32, J00, J11