Jim's Blog

Employment Trends under the Obama Administration

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Washington D.C., August 2, 2013 | comments
Typically headlines and analysts focus on the unemployment rate.  The labor force participation rate can be even more revealing of the current conditions on Main Street, America.  The labor force participation rate is simply the ratio of employed persons + unemployed persons divided by the population.
The labor force participation rate has fallen steadily since the beginning of the 2008-09 recession and it shows no sign of recovering.  In a typical recovery from a recession, the participation rate rises as people who were discouraged return to the work force.  If this were a healthy recovery, many more people would be participating in the labor force today.  The labor force also grows with population growth.  The BLS data show a population growth averaging 1% annually in the civilian population aged 16 years and over.  
Since the beginning of the Obama Administration in January, 2009, this population growth amounts to 10.8 million people.  Were these people participating in the labor force at the pre-recession level of 66%, a rate that held quite steady in the 2003-2008 time period, the labor force would have grown by 7.1 million.  Instead, with this weak economy, the labor force has only grown by 3.6 million since the beginning of the Obama Administration 53 months ago.  The implication is that half of the people who would have been added to the labor force have either not entered or have displaced people who have left the labor force.
Thus 3.5 million people are not participating in the labor force now who would have been participating had the economy recovered to its status before the recession.  If you were to add these non-participants to the number of unemployed and to the total labor force numbers, the current unemployment rate would be 9.3%.  Since these people have dropped out of the labor force, the unemployment rate appears to be improving to the reported rate of 7.8% for June, 2013.  Any unemployment rate over 7.5% is indicative of a weak economy, but the number doesn’t sound nearly as bad as 9.3%, the real unemployment rate.

The available labor force in the U.S. economy is defined as the “Civilian Labor Force”, age 16 years and over, and is reported monthly by the Bureau of Labor Statistics.  As an associated statistic, the BLS estimates the total “U.S. Civilian Population” in this age cohort.  The population figures provide the best available proxy for total population growth on a monthly basis.  Using these figures and the BLS data for “Employment”, “Unemployment”, and “Not in the Labor Force”, one can come to understand trends in the labor market.


The attached data are taken from the BLS Labor Force Statistics from the Current Population Survey, http://data.bls.gov/pdq/SurveyOutputServlet.



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