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A worker dips mugs into glaze at the American Mug & Stein Co. facility in East Liverpool, Ohio. Data from the U.S. Bureau of Labor Statistics show that the labor force participation rate of younger workers has been declining, while it has been rising among older workers.

(Meg Roussos/Bloomberg)

The story behind the falling unemployment rate in New Jersey and across the United States has been told with a significant asterisk: It’s falling not so much because more people are finding work than losing it, as it is that more people are leaving the labor force than entering it, economists say.

Just who is leaving is a point of debate. But government data suggest it is not simply a matter of Baby Boomers reaching retirement age. Rather, it is the boomers' children who appear to be falling out the most, data from the U.S. Bureau of Labor Statistics show. And in time, that could have an impact on the economy, experts say.

Since the year 2000, and particularly since the Great Recession, the labor force participation rate — or the measure of working-age people who either have a job or are looking for one — has dropped to its lowest levels in decades. And it should continue to fall over the next eight years or so, according to BLS projections.

The labor force participation rate in the United States stood at 63 percent for February. That’s slightly higher than where it was in December, but still a low it hadn’t previously fallen to since April 1978, according to BLS data.

New Jersey’s participation rate, which until recently was much higher than the national average, dropped to 63.6 percent for January, the lowest since June 1983, from 65.5 percent a year earlier.

These numbers don’t say who is leaving the labor force, or why. But according to national data provided by Patrick O’Keefe, director of economic research at CohnReznick in Roseland, the share of people in their prime-working years in the workforce has been on decline, particularly since the recession.

The participation rate among Americans between the age of 25 and 54 fell to about 81 percent last year from just above 84 percent in the year 2000. Those between 16 and 23 have plunged farther, to about 55 percent from around 66 percent at the start of the century.

By comparison, those between 55 and 64 have seen their participation rates gain to above 64 percent from about 59 percent in 2000, while 19 percent of those who are 65 and up either have a job or are searching for one.

New Jersey's labor force has shown similar trends, according to research the state Department of Labor and Workforce Development released in September.

The 55- to 64-year-old set in New Jersey saw its participation rate grow to 72 percent in 2012 from 63 percent in 2000, while the over-65 crowd doubled to nearly 24 percent over the same stretch, according to the research by economist Sen-Yuan Wu. Meanwhile, those between 25 and 54 saw their participation rates decline a few percentage points over the same period to between 82 and 83 percent.

On one hand, the gains by older workers reflect the changing nature of labor.

"As we live longer and as work becomes less physically taxing, people want to keep working," said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "Some people actually enjoy what they’re doing. The best case example is the labor force participation rate of professors at universities."

But they show the reality that, after the worst economic downturn since the Great Depression, many workers simply can’t afford to retire, Hughes added.

This changing dynamic means not just a more silver-haired workforce. It also impacts consumer habits in an economy that’s fueled by such spending, according to a study by Wells Fargo Securities. In a report published Friday, economists at the bank said data suggests that those in their prime working ages are spending more money on housing and education, particularly as the costs of both continue to rise. They predict that other consumer spending will remain relatively restrained for some time to come.

A main reason cited for the drop in young adults in the labor market is that they see less opportunity in the job market. But if they are using this time to pursue more education and training, that could lead to stronger earnings and productivity down the road, according to O’Keefe of CohnReznick.

For Hughes of Rutgers, the younger people who aren’t looking to get back into the labor force may find themselves perpetually behind as a result of dropping out.

"The real negative for the economy, and the economy may well shrug it off, is if you lose a young generation, they’re never going to catch up," he said.

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