Midnight Must-Read: Paul Krugman: No, the Decline in Employment/Population since 2007 Is Not Due to Demograph

Paul Krugman: Demography and Employment: “A blog post reporting research by Samuel Kapon and Joseph Tracy of the New York Fed is creating a splash….

The aging of the adult population would have meant a considerable [i.e., 1.5%-point] decline in the employment-population ratio over the past 7 years even if the economy had remained near full employment…. [But their] other [claim]… far from obvious is that the economy was highly overheated in late 2007…. The actual decline was from 62.9 to 58.6, or 4.3 points…. [Their] small employment gap [today] isn’t mainly because of the demographic adjustment…. The dramatic-sounding result that we don’t have much labor market slack isn’t… unless you accept the idea that the U.S. economy was above full employment even during the early-Bush slump years, and that by late 2007 it was a highly overheated economy on the edge of major inflation.