May 3, 2013

Labor Participation Remains Low Despite Job Gains

Keith Hall

Former Senior Research Fellow
Summary

This year the economy is adding more jobs per month than it did in 2012, according to new data from the Bureau of Labor Statistics. However, Mercatus Center senior research fellow Keith Hall—a former BLS commissioner—said that the labor participation rate is still quite low and the economy is not yet adding enough jobs to stimulate a robust recovery.

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This year the economy is adding more jobs per month than it did in 2012, according to new data from the Bureau of Labor Statistics. However, Mercatus Center senior research fellow Keith Hall—a former BLS commissioner—said that the labor participation rate is still quite low and the economy is not yet adding enough jobs to stimulate a robust recovery.

“For 2013 so far, we’ve averaged a gain of 196,000 jobs per month, a faster pace than the 183,000 rate in 2012. However, the labor force held constant as the participation rate remained at 63.3 percent, the lowest level since 1979.  While the unemployment rate has dropped by 0.4 percentage points since January, this was primarily due to declining labor force participation, as the employment rate held constant over this period.” 

Although the unemployment rate has dropped to 7.5 percent from a peak of 10 percent in October 2009, the current employment rate of 58.6 percent is nearly the same as the October 2009 rate (58.5 percent), according to Hall.

“Average monthly job gains since the end of the recession have only been enough to keep up with population growth. So most all of the decline in the unemployment rate is the result of people dropping out of the labor force.”