While Wall Street soars, jobs market still scarred

McClatchy Washington BureauMay 9, 2013 

— Don’t let the soaring stock market and applause from politicians over a slight dip in the unemployment rate fool you. A deeper dive into government data underscores just how bleak the picture still is in today’s labor market.

The unemployment rate in April was 7.5 percent, two full percentage points below where it stood at the end of the Great Recession in June 2009. The Obama administration touts the creation of 6.8 million jobs over the past 38 months. At the same time, the stock market has roared back from recession depths, the Dow Jones index of industrial stocks this week closing above 15,000 for the first time.

On the face of it this is good news.

But the improving headlines mask a scarred labor market. One out of five American families reported last year that not a single family member had a job. About 102 million Americans are completely out of the work force. And by a number of measures, participation in the labor market remains at or near modern lows.

“Most of the improvement that we’ve seen in the unemployment rate hasn’t been due to increased job opportunities. It’s been due to people dropping out of, or never entering, the labor market because of weak opportunities,” said Heidi Shierholz, a labor economist for the Economic Policy Institute, a liberal think tank. “Most of that decline is not coming from what would really be considered meaningful improvement in the unemployment rate.”

There are several aberrations present in today’s labor market.

For one thing, the fact that the unemployment rate has fallen two full percentage points since June 2009 omits the darker fact that it’s a share of a workforce of 155 million that’s smaller than it was at the start of the recession. If people who’ve dropped out of the workforce were included, the jobless rate would be higher.

“The fact is that we’re 2.6 million jobs short of where we were at the start of the recession. And that doesn’t even count five years of population growth,” said Chad Stone, chief economist for the Center for Budget and Policy Priorities, a center-left think tank.

It’s also 10 million jobs short of what the Bureau of Labor Statistics projected eight years ago.

One explanation is that there are a smaller number of people in the job market, either employed or looking for work, when counted as a percentage of the total working-age population.

In recent decades, about 67 percent of the working age population has been in the job market, the labor force participation rate.

In April, just 63.3 percent were in the job market. That’s well below the 65.7 percent at the end of the recession in June 2009, and from the 66 percent in June 2007, more than a year before the U.S. financial crisis.

Even with the 528,000 additional workers in the labor force since June 2009, the actual percentage of Americans participating in the labor force in April contracted by 2.4 points.

The labor force participation rate was already weakening before the Great Recession. The 2000-2007 economic expansion that followed the prior recession was dubbed a jobless recovery, in part because of the lagging recovery of the labor force participation rate.

Another sign of deep labor-market troubles comes from the Employment-Population Ratio. It reflects the proportion of working-age adults who are actually employed, and for that reason it is considered a better gauge for measuring how successfully the economy provides jobs for working-age Americans.

In April, this ratio stood at 58.6 percent, vs. 59.5 percent in June 2009 and 63.1 percent in June 2007.

“That’s not really much progress,” said Keith Hall, who was commissioner of the Bureau of Labor Statistics from 2008 to 2012.

In fact, only 11 states in 2012 had an employment-population ratio above the 63.1 percent in June 2007 before the financial crisis. Twenty-four states had an employment-population ratio last year that exceeded April's 58.6 percent. States with the highest percentage of working-age employment tended to be oil and farm states, with North Dakota and Nebraska having the highest ratio. The lowest ratios last year belonged to West Virginia at 50.3 percent, Alabama at 53.4 percent, and both South Carolina and Mississippi at 53.7 percent.

In fact, during the recession of 1974-1975, this number bounced around slightly above 58 percent, pretty much where it is now. But that was before the full-blown entrance of women into the workforce in the 1980s, which pushed this ratio to well above 60 percent.

Looked at another way, 41.4 percent of 245.2 million working-age adults, or 101.6 million, weren’t employed in April.

That’s almost 102 million people who were in college, retired, independently wealthy or living off of family or friends.

On top of that, 20 percent of the 80.1 million U.S. families had no one working last year, according to Labor Department numbers released last month. That’s up from the 17-18 percent of families with no one working between 2001-2008.

“There are 16 million families where nobody has a job,” said Hall, now a researcher at George Mason University’s Mercatus Center in Virginia. “That just seems to me to be remarkable.”

In these measures, differences are usually measured in tenths of a percentage point, rather than several percentage points.

“When multiplied over a labor market with 155 million people in it, even a 1 percentage point move is a huge number of people who are not in the labor force,” said Shierholz of EPI.

Shierholz has researched the so-called “missing workers” among the 102 million Americans not counted as employed or part of the workforce. About 4.4 million of these could eventually return, she estimates.

These “missing workers” are in addition to the 4.4 million long-term unemployed in April, as measured by the Bureau of Labor Statistics. To be considered long-term jobless, a worker must be out of work for six months or longer. As a percentage of the 11.7 million unemployed in April, they represent a frighteningly high percentage.

“It’s come down some (to 37.4 percent in April), and it’s still at levels that are higher than we’ve ever seen,” said Stone of the Center for Budget and Policy Priorities. “Before this (downturn), the highest it had ever been was 26 percent in the aftermath of 1981-82 (recession).”

Ohio’s Ken Demchik knows all this too well. The Cleveland resident has run businesses, isn’t afraid of hard work and at 52 is willing to change careers, if some employer would just give him a chance. He’s worked part time off and on for three years as he seeks a full-time job.

“It’s very frustrating when I wake up every day and I don’t have anywhere to go. I want to work. I want to make a company better. I know I can get the job done,” said Demchik, who has experience in retail sales and management. “I want people to know what is going on out there.”

Email: khall@mcclatchydc.com; Twitter: @KevinGHall

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