Missing Workers: The Elephant in the Recovery

by Emily Garr | February 9, 2011

More than a few observers (here, here or here) are finding it difficult to interpret last week’s BLS employment report. The household survey recorded a fairly large 0.4 percentage-point drop in the unemployment rate, at the same time that the establishment survey recorded an increase in payroll employment of a measly 36,000.

An increasingly missing piece of the puzzle may be the workers themselves. According to the latest report, fully 22 percent of 25 to 64 year-olds are not in the U.S. labor force. This means that they are neither in a job, nor looking for one. That 77.8 percent labor force participation rate among the prime working-age population is the lowest rate recorded in 23 years.

Until now, analysts (me included) have explained the stubbornly high unemployment rate in part by pointing to “missing workers” who steadily enter or re-enter the labor force as the job market strengthens, which may temporarily add to the ranks of the unemployed. Yet an increasing number are staying out—either because they don’t think a job is available, or school or family responsibilities keep them from looking for work.   Over the past three years, the U.S. working-age population has increased by about 2.6 million, but the size of the labor force has not budged. This may help to explain how the unemployment rate—the share of the population looking for work, but not finding it—could drop, even as job growth remains weak.








After a look at last week’s local area data from BLS, about half of the country’s largest metropolitan areas now (as of December 2010) have fewer labor force participants than they did at the start of the recession three years ago. The metropolitan areas of Houston, Dallas, Miami, Austin, and San Antonio have each seen their labor forces increase by at least 50,000 people, while Detroit, Atlanta, Chicago, and Los Angeles saw their labor forces shrinkby at least that much. This reminds us that the state of the jobs recovery is not only precarious nationally, but is shaped by distinct regional economic dynamics, and the opportunities (or lack thereof) on the ground in metropolitan America. We’ll look at those more closely next month in the latest edition of our Landscape of Recession series.

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