The unemployment rate has been slowly fallowing for years, but a different measure of the labor market, the so called employment-population ratio, has been dead in the water throughout the recovery. This is the conceptually simplest way of looking at the labor market. You take the number of employed people and you divide by the number of people, thus getting a ratio.
But precisely because this concept is so broad and so simple, it can encompass a lot of things other than the business cycle. For example, it’s always been the case that a fair number of people in the 55-65 age range are retired. And demographic factors mean that people in that older cohort are now a larger share of the population than they were five or ten years ago. Jan Hatzius, the chief economist at Goldman Sachs, has a chart circulating around that shows the employment:population ratio adjusted for this kind of demographic change.
There are two ways you can look at this adjusted figure. One is to say that relative to peak the vast majority of the decline in work—about 75 percent—is about the business cycle and not about demographics. The other is to look not at the peak but the trough, and say that the appearance that there’s been no recovery is essentially all about demographics.