November 8, 2013

Jobs Report Shows Biggest Drop in Labor Force Participation Since 2009

Keith Hall

Former Senior Research Fellow
Summary

Despite the government shutdown, the economy added 204,000 jobs during the month of October, according to the Bureau of Labor Statistics. While that number is considerably higher than many economists had predicted, the labor force participation rate—already at a 35 year low—declined sharply to 62.8 percent. Mercatus Center senior research fellow Keith Hall, a former BLS commissioner, said the labor force participation rate drop is the largest in four years and it is unclear what caused the sudden change.

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Despite the government shutdown, the economy added 204,000 jobs during the month of October, according to the Bureau of Labor Statistics. While that number is considerably higher than many economists had predicted, the labor force participation rate—already at a 35 year low—declined sharply to 62.8 percent.

Mercatus Center senior research fellow Keith Hall, a former BLS commissioner, said the labor force participation rate drop is the largest in four years and it is unclear what caused the sudden change.

“The signals from the employment report for October were rather mixed. Labor force participation should not have been affected by the government shutdown, as furloughed workers are still considered part of the labor force. However, the labor force participation rate fell dramatically from 63.2 percent to 62.8 percent – its biggest drop since 2009.

“The unemployment rate rose from 7.2 percent to 7.3 percent, as it appears that about half a million federal workers were furloughed and considered unemployed on layoff for the month. The employment of government wage and salary workers fell by 507,000 and the number of unemployed on layoff increased by 448,000 in October.

“If government workers had been counted as employed, and labor force participation had remained at the prior month’s level, the unemployment rate would have risen to approximately 7.5 percent.”