Job Gains in Texas and Losses in Caifornia and Florida

Unemployment: Is It All About Participation Rates?

by Elaine Schwartz    •    Apr 6, 2013    •    575 Views

Yes, at  7.6%, the unemployment rate is almost the same as last month. So too, at 11.7 million is the number of unemployed people. But some analysts think something is changing radically. They are concerned about participation rates.

When we look at unemployment, we see labor force statistics. The participation rate, though, is about people who are not in the labor force.

Think of it this way…

The US labor force is composed of people 16 and over who are gainfully employed or unemployed and looking for a job. No job? Not looking? 16 or over? Then you are not participating in the labor force. Mathematically, the participation rate compares everyone who is or could be in the labor force to those who actually are in it.

It is entirely logical that prime-age workers participate more than the young and the old. Men have a higher participation rate than women. Hispanic males participate more than white or black males.

US Labor Force Participation Rate, 2003-2013.

From the Bureau of Labor Statistics, people 16 and older.

From the Bureau of Labor Statistics. Percent of people 16 and older who are in the labor force.

In the graph above, representing just a decade, you can see that declining participation rates parallel the Great Recession. Covering more than 50 years, the broader trend below includes the 1960s-1990s rise in women’s participation rates.

From the San Francisco Fed.

From the San Francisco Fed.

Some look at the 2003-2011 graph and say the participation rate line plunged because of the Great Recession. Laid off and unemployed for a long time because of a GDP contraction, people left the work force. In addition, aging baby boomers retired early after fruitless job searches. Others, though, say we are undergoing fundamental  structural change. Unequipped to do new types of jobs, huge number of workers are leaving the work force. The jobs are there and the workers are there. But they do not match.

With economists that lean to the left supporting the cyclical side and those on the right saying structural, the debate about what ails our economy continues. Perhaps we can all agree, though, that choosing the right economic “medicine” means we have to diagnose our economic illnesses accurately.

Sources and Resources: Two Federal Reserve Reports, one from the Chicago Fed and the other from San Francisco provide excellent analyses of participation rates.

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