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Friday, April 26, 2013

The Unemployment Rate Would Be 11% If Only...


...The Labor Force Participation Rate hadn't gone down! 

Students at East Los Angeles College


As I scream into the night... again.. .about the labor force participation rate:  

I was replying to an article on long-term unemployment over at the Daily Beast (written by Megan McArdle), and someone brought up the "labor force participation rate" (which is the percent of people in the civilian non-institutional population who are actually employed or actively looking for work during a given month.)


Somebody mentioned the labor participation rate in a comment, the content of which is typical among Republicans, right wingers, and others who aren't very savvy about jobs numbers:

No, unemployment did not go down. If we had merely the same rate of labor force participation as we had in Jan 2009, the unemployment rate would be 11%. 

So I bang my head against the wall and write (again):


There is NO Ideal Labor Force Participation Rate!

The labor force participation rate generally goes up and down based on demographic and social trends as well as the overall economy.  

The BLS and economists as a whole have been waiting for the labor force participation rate to go down for years, as they could all see that the Baby Boomers, a huge portion of our population, were getting older.. and would be starting to leave the labor force.  

Older People are leaving the work force.. and there are millions of them!  

The labor participation rate of people 55+ has actually been going up for a couple of reasons, one of them being the increase in the retirement age, another being the fact that many people have less physically taxing jobs and they can work longer.  Of course, the recession also impacted the nest egg of many Baby Boomers, forcing some of them to work longer than they anticipated.

But every month a large number of Baby Boomers do leave the work force.  And because there are so many Baby Boomers as a whole, it does significantly impact the overall labor participation rate.  Do the people who insist that our unemployment rate should really be 11% want people not to retire?  Do they want to force older people to remain in the work force and look for jobs?

More Young People are in School... and that means fewer young people in the work force.   

The other big social change that has impacted the labor force participation rate among younger people (16-24) is that enrollment in school has increased ever since the BLS started tracking labor participation.  The more people are in school, the fewer are in the labor force.  (This is true even though many people who are enrolled in school do work full time or part time.  As a whole, more people in school means less participation in the labor force.)

The labor force participation of young people 16 to 24 actually peaked in the Carter years, and, after the recession of 1981 ended, it peaked again in the late Reagan years.  Since 1989, the percentage of young people in the labor force has gone relentlessly down.  And the percentage of young people under 30 in school has gone relentlessly up during those same years.

So.... Do people who blather on about the "labor participation rate" really believe we should keep people from retiring and keep people from going to school in an effort to prop up the "labor participation rate"?                  

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