Why is U.S. Labor Participation Rate so Low?

The official unemployment rate in the United States is below 5%. If these numbers are a true reflection of the economy why have wages not gone up significantly? If the unemployment rate is an accurate account of how the U.S. economy is doing, why is the labor participation rate so low? The latest statistic from the Bureau of Labor Statistics shows the participation rate in September 2016 at 62.9%. In September 2006 the participation rage was 66.1%.

This post is for all the people, especially younger and older workers who don't believe the unemployment rate is a very good indicator of job availability. It's no secret the unemployment rate does not take into account those who have given up looking for work. Millions of workers lost their jobs during the great recession. After their unemployment benefits ran out many gave up looking for jobs. They don't count as being unemployed.

The unemployment rate is not a great way to measure the economy. The rate does not reflect what is really happening in the economy. Here are a few reasons why:

• The unemployment rate does not include workers of all ages who would like to work, but have become so discouraged they stopped looking.  
• The number of new applications for unemployment is cited as a major factor in how the labor sector is doing. These reports don't take into account workers laid off who don't qualify for unemployment. You have to work for a certain period of time to qualify. There are lots of other factors that disqualify those who have lost their jobs.
• The unemployment rate does not factor in older workers who would like to work. Many of these workers were pushed out of jobs in favor of younger workers. There is a reason nearly half the workforce at age 62 years are choosing to take social security early. They were pushed out of the workforce and can't find new employment. Surprise, surprise they don't count as unemployed!
• The unemployment rate does not reflect the millions of millenials working part-time who would like full-time employment. It does not count under-employed workers of all ages working in jobs not using their skills or education.

The labor participation rate is a better statistic on how healthy the labor force is doing. No statistic tells the whole story. In today's economy the unemployment rate going down is celebrated like a World Series win. The main problem is millions of potential workers don't count and nobody talks about it. The labor participation has declined every year since 2008 and nobody talks about it. You would think Republicans would jump on this talking point, but most politicians think the American public would not understand this statistic because we the electorate are too stupid. So politicians talk about something simple. The unemployment rate.

The next time you see headlines on the news about how the unemployment rate has dropped or fewer than expected workers have filed for unemployment think about the millions of younger underemployed workers living in their parents basements or the older workers shunned by HR departments in companies large and small and remember they don't count in either statistic.  

Next time: Many politicians talk about how important it is to get GDP up to 3,4, 5, 6 %. Do these same public officials even know what GDP is?