June 27, 2019

If the Unemployment Rate is Falling, Why are So Many People Out of Work?

If the unemployment rate is falling, why are so many people out of work? Is it a case of smoke and mirrors? Here are the latest numbers– courtesy of the Bureau of Labor Statistics. You decide.

1) Civilian Noninstitutional Population = 238,704,000

“Persons not in the labor force combined with those in the civilian labor force constitute the civilian noninstitutional population 16 years and over. (There is no upper age limit.)”

2) Civilian Labor Force = 153,186,000

“The civilian labor force is the sum of employed and unemployed persons.  Those not classified as employed or unemployed are not in the labor force.”

 3) Civilian Labor Force Participation Rate = 64.2

              (153,186,000 divided by 238,704,000 = 64.2%)

“The labor force participation rate is the labor force as a percent of the population, and the employment-population ratio is the employed as a percent of the population.”

4) Employed = 139,323,000

“People are classified as employed if they did any work at all as paid employees during the reference week; worked in their own business, profession, or on their own farm; or worked without pay at least 15 hours in a family business or farm. People are also counted as employed if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor-management disputes, or personal reasons.”

5) Unemployed = 13,863,000

“People are classified as unemployed if they meet all of the following criteria: they had no employment during the reference week; they were available for work at that time; and they made specific efforts to find employment sometime during the 4-week period ending with the reference week.  Persons laid off from a job and expecting recall need not be looking for work to be counted as unemployed.  The unemployment data derived from the household survey in no way depend upon the eligibility for or receipt of unemployment insurance benefits.”

6) Unemployment Rate = 9.0% (U-3)

“The unemployment rate is the number unemployed as a percent of the labor force.”

From January 2001 through December 2008, the Labor Force Participation Rate averaged 66.2%.  From January 2009 through January 2011, the Labor Force Participation Rate averaged 65.0%.

Is a profound change occurring in our culture to cause the Labor Force Participation Rate to fall this drastically?  Recall the profound change ushered in by the large scale introduction of women into the workforce during World War II, i.e., witness the late “Rosie the Riveter,” aka, Geraldine Doyle.

Some seventy years since Rosie’s entrance into the labor force, might it be possible that today’s profound change involves the reality that that the so-called “discouraged worker” is not being counted correctly?

Let’s take another look…

The Average Labor Force Participation Rate from January 2001 through December 2008 = 66.2%

Overlaying the 66.2% on the Civilian Noninstitutional Population of 238,704,000 we arrive at a Civilian Labor Force of 158,107,000

The difference between the official Civilian Labor Force (based on 64.2% participation rate 153,186,000) and the adjusted Civilian Labor Force (based on 66.2% participation rate of 158,107,000) = 4,921,000

If we add the 4,921,000 to the ranks of the unemployed, the unemployment number increases to 18,784,000 and the U-3 version of the unemployment rate swells from the official 9.0% to 12.3%.

Take a look. You decide.

Professor Donald Byrne holds a Ph.D. in economics from the University of Notre Dame and is a long-time Professor of Economics at the University of Detroit Mercy. For the past several years, he has been active in developing his New Paradigm in Economics. He and his colleagues are contributors to Catholic Journal. The full version of this article may be found at their website: http://www.econnewsletter.com 

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Donald Byrne

DONALD BYRNE was a retired Professor of Economics at the University of Detroit Mercy and held a Ph.D. in Economics from the University of Notre Dame. He taught at other institutions, including: University of California-Berkeley, Notre Dame, Wayne State University, and Walsh College. In 2003, he helped launch an economics and finance oriented online newsletter: EconNewsLetter.com. He also served on several financial-institution boards and as a Visiting Scholar at the Federal Reserve Bank of Chicago. A devout Catholic and family man, Dr. Byrne passed into eternity on May 7, 2018. May God rest his soul.

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Written by Donald Byrne