May 3, 2012

Labor Participation Sees Largest Decline in History

Keith Hall

Former Senior Research Fellow
Summary

As we await Friday’s jobs report, if the Labor Department numbers are disappointing for a second month in a row, it will raise concerns that the economy is losing momentum.

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As we await Friday’s jobs report, if the Labor Department numbers are disappointing for a second month in a row, it will raise concerns that the economy is losing momentum.

But, the bigger story is the people that aren’t counted in the unemployment numbers. Participation in the labor force is near a 30-year low—there are millions of people, normally part of the labor force, that have stopped working and are no longer even looking.

“This has been by far the largest disengagement from the labor force we’ve seen in more than 60 years. This also means an 8.2% unemployment rate is not as close to recovery as it would normally indicate.

“We need 130,000 new jobs per month just to keep up with population growth, and at least 250,000 jobs to feel like things are getting better, but even at that rate it would take years for a full labor market recovery.