Politics

The Labor Participation Rate, Explained

The figure that may say more about the U.S. job market than the unemployment rate

The U.S. labor force participation rate is the percentage of those age 16-years-old and older (who are not active-duty military or institutionalized) that is either employed or seeking employment. The rate does not, however, distinguish between those with full-time and part-time employment. Nor does it account for wages or the types of jobs individuals hold or are seeking (in other words, it does not distinguish between low-paying service jobs and high-paying manufacturing jobs).

[lz_jwplayer video= “86TDE4vx” ads=”true”]

In July 2016, the labor force participation rate was 62.8 percent, down from its all-time high of 67.3 percent in January 2000. One reason for the rate’s decline is an increase in people who have retired. However, a major cause has been the increase in the number of working-age people who have given up trying to find work, following the Great Recession that began in late 2008.

lfp_fact_sheet

This so-called ‘discouraged worker’ phenomenon persists to this day. Because the Department of Labor’s official unemployment statistic (the U-3 number, which mainstream media tends to focus on) does not count discouraged workers as unemployed, the labor force participation rate is in some ways a better measure of the state of the economy.

A third Labor Department figure, the U-6, while not measuring those who have given up trying to work, does include both the unemployed and the underemployed, and similarly is a more accurate reflection of employment prospects than the media’s preferred measure.

Join the Discussion

Comments are currently closed.