Neil Irwin gave a reasonable assessment of the Obama administration's record on job creation and wage growth, but there is one item that could use clarification. He notes the decline in prime-age male labor force participation, but then dismisses it as part of a long-term trend.
There are two points here that are worth noting. The participation rate of prime-age women had been rising prior to the recessions in 2001 and 2008–09. In both cases it was projected to continue to rise. Economists are happy to now say that the lower current rate is simply due to more prime-age women choosing not to work, but it is not obvious to me that economists today are better able to determine the underlying rate of labor force participation for prime-age women than economists working in 2000 or 2006. In other words, I don't buy that the drop in women's labor force participation is not the result of weak demand.
The other point is that labor force participation is actually an imperfect measure since the decision of someone to look for work, and therefore be classified as part of the labor force, depends in part on the generosity of unemployment insurance (UI) benefits. (To qualify for benefits you have to say you are looking for work.) As requirements for UI have gotten stricter more people give up looking for work and drop out of the labor force.
If we look at prime-age employment rates (EPOP) we get a measure that is not sensitive to this problem. So, while Irwin tells us:
"The proportion of men 25 to 54 who are part of the labor force has fallen by 1.4 percentage points during the last eight years.
"What is less widely understood, though, is that this shift isn’t some new phenomenon of the Obama era. That same measure fell by 1.7 percentage points during the eight years of George W. Bush’s presidency. Even during the boom years of the Clinton administration, it fell by 0.9 percentage points."
If we look at EPOPs we got a somewhat different picture, most notably during the Clinton years. From January 1993 to January of 2001 the EPOP for prime-age men rose by 2.1 percentage points. Even if we take the more reasonable peak to peak comparison we see little evidence of a downward trend with a peak in February of 1990 of 90.1 percent compared to a peak in January of 1999 of 89.7 percent. In other words, if we look at EPOPs, there is not much evidence of a downward trend in EPOPs in the decade prior to the 2001 recession.
The point is important since there are many people in policy positions who want to say that the current level of unemployment and employment rates is the best we can do and that the Fed should jack up rates to prevent the labor market from tightening further. (The same was true when the unemployment rate fell below 6.0 percent in 1995.)
If in fact there are still millions of people who would work if they saw jobs available, then we are needlessly depriving them of employment. Furthermore, by weakening the labor market, the Fed would be preventing tens of millions of workers from having sufficient bargaining power to secure rate increases and make up the ground loss in the recession.