YOU would expect strong job growth to be accompanied by falling unemployment, but America is proving that one does not always entail the other. Over the past year, employment is up by fully 3m but the unemployment rate has stayed around 5%. In fact, a few more workers are unemployed than a year ago (see chart). The reason is that more Americans are seeking jobs. Over the past 12 months the labour-force participation rate of so-called “prime-age” workers—those between 25 and 54—is up by just under one percentage point, the fastest growth recorded since January 1989. Economists trying to spot inflation on the horizon want to know how long this trend can continue.
The recent surge in prime-age participation follows a long decline from its peak, 84.6%, scaled in January 1999. Between then and September 2015, it tumbled by an average of about a fifth of a percentage point a year. Among men, it had been falling since the mid-1960s. The long slide accelerated after the financial crisis, as laid-off workers quit the labour force in droves.
Hence the refrain of some that low unemployment is a mirage: stronger economic growth, they say, could draw plenty of folk back into work. Indeed, some 1.8m people say they want a job, but are not technically in the labour force because they have not recently looked for one. Restoring the employment-to-population ratio among prime-age workers to its pre-crisis high would require getting all these hands to work and then some: a total of at least 2.9m new jobs would be needed (or more, since the prime-age population is growing by about 0.3% a year).
This reservoir of potential workers remains untapped. Rising participation does not reflect more Americans getting off the couch to seek work. Rather, the long-term unemployed are less likely to stop looking for a job. The probability of a worker who has been unemployed for 53 weeks or more leaving the workforce in a given month is about 25% today, down from over 30% at the end of 2015, according to Zach Pandl and David Mericle of Goldman Sachs. That more than accounts for higher participation, they say, because rejoining the workforce has become slightly less common over the same period. The newfound reluctance of jobseekers to give up may reflect the restoration in January in 22 states of strict limits on the period when the jobless can claim food stamps.
This wealth of potential workers suggests that participation could rise much further. But there are reasons for scepticism. A new paper by Alan Krueger of Princeton University finds that participation is only loosely connected to short-term swings in the economy. Instead, Mr Krueger identifies several underlying factors holding it down. For instance, even within the prime-age bracket, the population has been ageing. Those aged 45-54 have long been less likely to work than those aged 25-34. And prime-age men outside the workforce are in startlingly bad health. Nearly half of them take painkillers daily; 34% report at least one disability (though only 25% receive disability benefits). A vast majority say that their disability is a barrier to employment.
An unpublished paper by Mark Aguiar at Princeton University and three co-authors suggests another potential obstacle: that better video games could be luring young men away from work. Mr Krueger reports that among men aged 21-30 “idleness”—meaning not working, seeking work or studying—rose by 3.5 percentage points between 1994 and 2014. Over the past eight or so years, the time young men outside the labour force spent gaming rose from 3.6 to 6.7 hours per week.
Any of these forces could halt the recovery of participation, but it is hard to know whether they will. Messrs Pandl and Mericle think the remaining slack in the labour market is equivalent to only 0.5% of the workforce. But their estimate has been roughly flat since early 2016, suggesting the economy’s speed limit is not being tested. Until it is, the Federal Reserve, which is pondering raising interest rates, should let employment keep growing strongly.