Labor Force Participation at 26 Year Low

By Steve McCann

The headlines today trumpet a decline in the unemployment rate to 9.0%, however only 36,000 jobs were created. The rate drop is due to the absurd policy of the Bureau of Labor Statistics not to count those who dropped out of the labor and ceased looking for a job.

A more important but unreported statistic is the massive drop in the labor force. Today at 64.2%, the labor force participation rate (as a percentage of the total civilian noninstitutional population) is now at a 26 year low. In January of 2000 it hit 67.5% by comparison.

This the lowest since 1984 and is the primary reason the unemployment rate has dropped to 9.0%. Those not in the labor force has increased from 83.9 million to 86.2 million (a drop of 2.2 million on just one year).

In calculating the unemployment rate the BLS is now counting only 13.9 million as unemployed compared to 15 million two months ago when only 80,000 jobs created. These are the disenchanted, no longer looking for a job and thus no longer on the BLS rolls.

The unemployment rate is a sleight of hand the reality is far worse. There is no broad base recovery underway despite the best efforts to report otherwise.

Update from Steve McCann:

The Gallup Organization issues its own unemployment statistics which have been somewhat more accurate than the BLS and take into account more of the effect of those who have dropped out of the labor force. Yesterday Gallup reported a U.S. unemployment rate of 9.8% up from 9.6% in December.

Further the underemployment rate (those unemployed and working part-time because they cannot find full-time work) in January was 18.9% down from 19.0% in December. The closest number to this statistic issued by the BLS is the U-6 which showed 16.9% in January.

The summary in the Gallup report is:

Gallup's measures paint a real-time picture of the current job realities on the ground. Nearly 1 out of 10 Americans in the U.S. are unemployed nearly 1 out of 5 are underemployed, and the nation's overall hiring situation has not improved over the past four to six months.

So, we have the dueling unemployment rates. However Americans on Main Street know the situation for jobs has not improved over the past year as even more people enter the labor force each year.