America's labor force recovery lags

One family in five has no employed adult

McClatchy Washington BureauMay 10, 2013 

— Don’t let the soaring stock market and applause from politicians over a slight dip in the unemployment rate fool you. A deeper dive into government data underscores just how bleak the picture still is in today’s labor market.

The unemployment rate in April was 7.5 percent, 2 full percentage points below where it stood at the end of the recession in June 2009. The Obama administration touts the creation of 6.8 million jobs in the past 38 months. At the same time, the stock market has roared back from recession depths, the Dow Jones index of industrial stocks this week closing above 15,000 for the first time.

On the face of it, this is good news.

But the improving headlines mask a scarred labor market. One out of five American families reported last year that not a single family member had a job. About 102 million Americans are completely out of the workforce. And by a number of measures, participation in the labor market remains at or near modern lows.

“Most of the improvement that we’ve seen in the unemployment rate hasn’t been due to increased job opportunities. It’s been due to people dropping out of, or never entering, the labor market because of weak opportunities,” said Heidi Shierholz, a labor economist for the Economic Policy Institute, a liberal think tank. “Most of that decline is not coming from what would really be considered meaningful improvement in the unemployment rate.”

There are several aberrations present in today’s labor market.

For one thing, the fact that the unemployment rate has fallen 2 full percentage points since June 2009 omits the darker fact that it’s a share of a workforce of 155 million that’s smaller than it was at the start of the recession. If people who have dropped out of the workforce were included, the jobless rate would be higher.

One explanation is that there are a smaller number of people in the job market, either employed or looking for work, when counted as a percentage of the total working-age population.

In recent decades, about 67 percent of the working-age population has been in the job market, the labor force participation rate.

In April, just 63.3 percent were in the job market. That’s well below the 65.7 percent at the end of the recession in June 2009, and from the 66 percent in June 2007, more than a year before the U.S. financial crisis.

Even with the 528,000 additional workers in the labor force since June 2009, the actual percentage of Americans participating in the labor force in April contracted by 2.4 points.

The labor force participation rate was already weakening before the recession. The 2000-2007 economic expansion that followed the prior recession was dubbed a jobless recovery, in part because of the lagging recovery of the labor force participation rate.

Another labor gauge

Another sign of deep labor-market troubles comes from the Employment-Population Ratio. It reflects the proportion of working-age adults who are actually employed, and for that reason it is considered a better gauge for measuring how successfully the economy provides jobs for working-age Americans.

In April, this ratio stood at 58.6 percent, vs. 59.5 percent in June 2009 and 63.1 percent in June 2007.

“That’s not really much progress,” said Keith Hall, who was commissioner of the Bureau of Labor Statistics from 2008 to 2012.

In fact, during the recession of 1974-1975, this number bounced around slightly above 58 percent, pretty much where it is now. But that was before the full-blown entrance of women into the workforce in the 1980s, which pushed this ratio to well above 60 percent.

Looked at another way, 41.4 percent of 245.2 million working-age adults, or 101.6 million, weren’t employed in April. That’s almost 102 million people who were in college, retired, independently wealthy or living off of family or friends.

On top of that, 20 percent of the 80.1 million U.S. families had no one working last year, according to Labor Department numbers released last month. That’s up from the 17-18 percent of families with no one working between 2001-2008.

“There are 16 million families where nobody has a job,” said Hall, now a researcher at George Mason University’s Mercatus Center in Virginia. “That just seems to me to be remarkable.”

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service