Lower unemployment rate due to smaller work force, not more jobs

From The DailyCaller.com, by Elizabeth Dorton, 07/25/13 –
A new report published by the Century Foundation shows  that though the unemployment rate is going down, the decreasing numbers aren’t  due to a spike in employment rates or  job creation. Instead, more people are leaving the work force entirely.

The labor force participation rate is seeing a large decline. Rather than  resulting in less unemployment because more people are becoming employed, there are  simply fewer people to employ, The Washington Post reports.


The dotted red line representing the U-3 unemployment rate, which is being  touted as the recovery of the economy, shows that the unemployment rate is going  down.

The solid blue line indicates the employment/population ratio, which is  essentially everyone in the U.S. who is employed divided by everyone in the  country who is technically available to work. That number has stayed static for  the last three years.

The dotted blue line represents the labor force participation rate, showing  that it has been in steady decline.

The decreasing unemployment rate is due to more people leaving the work force  rather than more people getting jobs.

Decreased participation in the work force could be due to retirement numbers  and those who have who have stopped searching for a job. The Century  Foundation study shows that in 2010 during the height of the recession, the  labor force participation rate stood at 65.09 percent, with the unemployment  rate at 10 percent. At the end of Q2 in 2013, the labor force participation rate  dropped to 63.46 percent.

If the unemployment rate were calculated at the 65.09 percent labor force  participation level, U-3 would stand at 9.77 percent today, essentially the same  it was before.

However, because the unemployment rate has dropped, the general consensus is  that the American economy is on the road to recovery. Taking that logic to  its full extent, we would have a zero percent unemployment rate if zero people  participated in the work force.

Read more:  http://dailycaller.com/2013/07/25/lower-unemployment-rate-due-to-smaller-work-force-not-more-jobs/#ixzz2aSlDMRq4

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