Job Gains But Fewer Workers

The Bureau of Labor Statistics (BLS) released its November employment report on Friday revealing a seemingly promising drop in unemployment as job seeker rolls reduced by 594,000.  This new data generated a jobless rate of 8.6 percent, down four-tenths of a point from last month and 1.2 percent year-to-year. 

But fewer unemployed workers doesn’t necessarily mean more people have jobs.

Further into the report the BLS stated, “the number of unemployed persons, at 13.3 million, was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount.”

So over half of the workers accounting for the drop in the official unemployment rate didn’t find jobs.  Instead they stopped looking for work.

As I discussed in an earlier post readers should understand that these initial estimates are starting points and therefore subject to change.  Nevertheless this shrinking of the workforce illustrated in the report accentuates a longer run trend that has persisted the past decade. 

Economists refer to the participation rate when examining the workforce levels.  This is the ratio of workers and job seekers divided by the working age population.  In the mid-60s this figure ballooned as women began to bring home paychecks and it reached a plateau of about 67 percent in the 1990s. But starting in 2001 and continuing with the latest jobs data this figure has declined and now rests at 64 percent.  

Although unemployment - the number we are conditioned to track - dropped over one percent the past year, the participation rate crept down half of a percent, in effect neutralizing some of the tangible gains of a lower jobless rate.