Institute for Policy Innovation | Dr. Merrill Matthews

IPI resident scholar Dr. Merrill Matthews explains today in Rare why the labor force participation rate is a far better indicator of the current health of the U.S. economy than what the U.S. Bureau of Labor Statistics currently says is “full employment.”

He writes:

“What economists call “full employment” just isn’t what it used to be!
The U.S. Bureau of Labor Statistics recently announced that the unemployment rate has dropped to 4.9 percent—the lowest in nearly a decade. A 4.9 percent unemployment rate is at the high end of the economic concept of full employment, an economy where everyone who wants a job can find one.
Does that sound like this economy?
The last time the unemployment rate was lower was in 2007, just as the red-hot economy turned into the Great Recession. But this economy doesn’t feel red-hot—and it might yet turn into a recession. In fact, for millions of Americans the job market is downright cold—because they haven’t been able to find a job in years.
It’s been so long for some workers that they’ve given up the search. And when they quit looking the government no longer counts them as unemployed—even though they are just jobless as when they were considered unemployed.
A better employment measure is the labor force participation rate, which represents the percentage of the population that has a job. In February of 2009, right after Barack Obama entered the White House, the labor force participation rate was 65.8 percent. It has never been higher since, and the country then was in the middle of the Great Recession.
Last month it was 62.7 percent.
The situation is a little better for young workers, but the trend is just as bad. According to the Federal Reserve Bank of St. Louis, for workers ages 20 to 24 the participation rate has declined to 70.1 percent. And that’s not because more are going to college; it was 73.2 percent when Obama entered office.
For black or African-American men age 20 or over, the participation rate is 67.1 percent, down from 70.5 percent in January 2009, when Obama became president.
For high school graduates with no college, it’s a stunningly low 57.5 percent, down from 62.9 percent in January 2009—the biggest drop we’ve seen.
And for women age 20 and over it’s nearly as bad: 58.2 percent. It had been 60.9 percent in January 2009.
But here’s the thing: For all of the above-mentioned groups except one, women, the labor force participation rate started declining before Obama came into office. However, the percentage of women in the work force peaked at around 61 percent in the fall of 2008, in the middle of the recession, and the rate has dropped ever since.
No wonder many millennials are restless and demanding change; they’ve seen their access to a job steadily decline. No wonder many black Americans are frustrated about their economic opportunities. No wonder both Hillary Clinton and Bernie Sanders are trying to mobilize the female vote—with former Secretary of State Madeline Albright recently asserting, “There’s a special place in hell for women who don’t help each other!”
These workforce declines all occurred on, wait for it … Barack Obama’s watch. And they’re a direct result of his high taxes, more mandates and increased regulations, which both Sanders and Clinton pledge to double down on.
So if one of them are elected, you might see the unemployment rate remain low—even as more Americans give up trying to find a #%&@ job!”