Trib Live: A downshifting job market

Originally published on TribLive.com, Ralph R. Reiland

June 12, 2016

Signaling a substantial weakening in what's already the slowest economic recovery since the Great Depression, as measured by growth in economic output, the American economy added a disappointing 38,000 jobs in May. That's well below job gains averaging 116,000 per month during the previous three months and the weakest job growth numbers in five years.

Still, the federally-defined unemployment rate in May dropped to 4.7 percent, with the official number of unemployed declining by 484,000 to 7.4 million.

Somewhat contradictory to the federal report of lower unemployment, a record 94,708,000 Americans were not in the labor force in May, a 664,000 increase from April, causing the labor force participation rate to drop to 62.6 percent — a 38-year low.

In short, the number of people officially counted as unemployed dropped by 484,000 in May while 664,000 people during the same time became ineligible to be counted as unemployed by leaving the labor force.

Given the government's method of determining the level of joblessness, President Obama could exit his presidency with no unemployment, zero percent, if everyone out of work gave up looking for a job and left the labor force by November.

When President Obama took office in January 2009, 80,529,000 Americans were not participating in the labor force. Since then, another 14,179,000 Americans have left the workforce or became partially unemployed and are consequently officially barred from being counted as unemployed. Some of them retired (roughly half of the total leaving the workforce); some were cut to part time from full time; some returned to school or became incarcerated because of the lack of employment opportunities; and some stopped looking for work because they were unsuccessful in finding a job.

The number employed part time for “economic reasons,” officially referred to as “involuntary part-time workers” by the Labor Department, increased by 468,000 to 6.4 million in May. Counting that group alone as unemployed would nearly double the official unemployment rate.

Another 1.7 million persons in May were classified as “marginally attached” to the labor force. These individuals were not counted in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. “They were not counted as unemployed because they had not searched for work in the four weeks preceding the survey,” reported the Bureau of Labor Statistics.

Within the marginally attached workforce, 538,000 were labeled as “discouraged workers” in May. The “discouraged,” by official classification, are not looking for work because they believe no jobs are available.

The labor participation for men ages 25 to 54 in the U.S. economy is uniquely low by historical and international standards. “If the U.S. had the same labor participation rate today as in late 2007, the nation's workforce would be roughly 8 million larger,” reported the Los Angeles Times in September 2015.

Globally, the Organization for Economic Co-operation and Development reports that other advanced nations have not seen their labor forces shrink quite like America. Among 38 developed countries between 2000 and 2014, only three nations showed shrinking labor forces for workers ages 15–64 and the U.S. was one of them.

Ralph R. Reiland is an associate professor of economics at Robert Morris University (rrreiland@aol.com).