The news last week that the number of opioid prescriptions fell in 2017 for the fifth straight year is good news for the economy, writes economist Michael Pearce of Capital Economics, since it suggests that the recent decline in the number of people on disability can continue as fewer people become hooked on the painkillers and exit the workforce.
The labor force participation rate is being pushed lower by Baby Boomer retirements, but a surge of workers ages 25-54 years old rejoining the workforce has largely offset that decline. “While around half of that rebound reflects the cyclical strength of the labour market drawing in previously discouraged workers, the recent reversal of the decades-long trend of rising disability has played a key role too,” Pearce writes in a note to clients. “The opioid crisis is not the only factor driving disability rates, but it does appear to be playing a significant role.”
The decline in opioid prescriptions should increase labor force participation by about 0.1 percentage points in both 2018 and 2019, Pearce says. “That may not sound like a lot, but it would be the equivalent of adding 10,000 people to the labour force each month, a significant boost in an economy where the labour force is otherwise expanding by around 100,000 or so per month. And it represents a big turnaround from the situation just a few years ago when rising disability was a drag on potential economic growth.”