I have always been a little suspicious of the official unemployment rate, just from observing the ways people can be in or out of work, and the many ways it can be measured. Disability and workers compensation claims seem to rise when jobs are scarce. People may decide to go to law school, stay home with the kids, take temporary jobs, or start drawing a pension rather than continue a fruitless search. None of these substitutes show up in the unemployment figures.
I find the labor force participation rate a lot more straightforward. It includes anyone over the age of 16 who has a job, whether permanent or temporary. The rate of participation declines as a population ages, of course. You can drill into the Bureau of Labor Statistics database for more details, but the overall picture is pretty bad.
At the end of 2008, it all went south in a hurry:
The National Bureau of Economic Research nearly called the end of the recession as July 2009 at their April 2010 meeting, based on positive GDP reports, yet job losses are accelerating (unexpectedly). There is very little point in trying to stimulate the economy while making it less attractive to hire American workers. How long before someone in the Obama administration figures that out?
Just a couple more observations, based on this chart and some of the other things I found rummaging around in the data:
- The jobs lost in the 2000-2001 recession don’t seem to have ever come back. The percentage of people in the workforce stabilized, but never recovered. This time, it looks like the re-employment picture will be even worse.
- The biggest change in the rate since WW II was caused by the massive entry of women into the workforce (not shown in this chart). In the past few years, the rate of workforce participation for women has actually decreased slightly. Men’s employment picture is far more dire, but the change in women’s employment rate, while much smaller, is unprecedented.
- The Boomers are not retiring. Their workforce participation rate is well above forecast. Have you looked at your 401(k)?