If the drop is mainly driven by demographics — aging baby boomers retiring — then the lower unemployment rate gives a true picture of the amount of slack left in the labor market. If the contraction instead is caused by discouraged job-seekers giving up their search, then the jobless rate doesn’t reflect the true state of the market….
Central bank economists are divided over how much of the fall in the workforce is structural and thus not likely to be reversed.
“There is disagreement within the system,” said Geoffrey Tootell, senior vice president and director of research at the Federal Reserve Bank of Boston.