I would tend to agree with Jobs' observation. Let me explain:
I come from a family where my father is an avid, frequent reader. For as long as I can remember, we have given each other books for Christmas, birthdays, etc. By now, our personal libraries number in the hundreds. However, my mother, sister, and brother probably haven't read an entire book in more than a decade. My wife, similar story, although she has a sister that reads those little Manga books (does that count?). So, let us assume that in every family of four, over the last twenty five years or so, there has been on average one less avid reader for the total block. Some of this is explicable; people work more, have more outside hobbies and interests, or get there "information" from the internet or TV as opposed to print media. In the end, this works out to a generally lower readership by the population in general.
In my free time, I go to the public library. While I am there, I would imagine that one out of every five people I see ever actually sits down and reads anything. Some that do read only magazines or newspapers. Most of the computer users are using MySpace or Facebook. Most of them are kids or teens that just run around or talk much too loudly.
I've read more than fifty books in the last seven months, and I hope to keep my book reading up in the next four years (med school, etc.), but I can definitely see where Jobs gets this impression. I went to a High School where it seemed like everyone was so viciously anti-intellectual (or anti-literate) as to almost defy imagination. A sickening place to be if you value learning, intellectual cultivation, or have varied interests outside of football.
Personally, I think the fall of reading = the fall of civilization. My youth was essentially a festival of reading as much as possible on a very broad array of subjects. More or less, I attribute my successes in life to this information foundation I built from reading. It is a shame that people don't do it more often.