The unemployment rate, as an example, has consistently hovered in the 8% range. And from our high school days, we learned that 7% was considered by most economists to be full employment. But that number has changed. Beginning in the late 1970's, they started to report unemployment as a percent based on how many people are actively looking for work. Later, they decided that unemployment is those that are looking, and on unemployment benefits. But what happens when their benefits run out? They have not found a job, they are just not counted, even if they are actively looking.
Labor force participation is an easier number to look at. That number is the total population of a country divided by the number of people that actually have jobs. It is much cleaner.
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Unemployment has been dropping since its high of near 10% in 2009. That would seem to be good news, however, Labor participation has been dropping as well. Traditionally that number is in the upper 60% range. There are a number of people who don't work outside the home, stay at home moms and the elderly who are retired. There are also the disabled, who are incapable of working. So since 2009, what has the labor force participation rate done? Currently it is at just a touch more than 62%. In 2003, the most recent peak this rate was 66.5%. In 2009 the rate was 65.7, a full 3 percentage points higher than today, yet the official unemployment has dropped by 3%. If we had just maintained the 2009 rate, there would be 7 million more people working. And if you add them to the current number it would move the unemployment rate to almost 11%.
So what happened to these 7 million people? They are surviving the best the can. Some are spouses, where the other spouse works, so while it is a hardship, survival is a little easier. Some are couples, perhaps with children, that are literally living day to day, with no hope. Some are business people, that although they have no job, have sufficient savings to muddle on. The last time labor participation was this low was the late 1970s, and some of these people remember that time. They were coming out of school, just hoping to find a job. Now they are near retirement, just hoping to find a job.
There is good news! After the 1970s came the 1980s, that decade ushered in one of the longest post World War II recoveries, lasting until the early 2000s, with a few hiccups. The good news is also that bad times don't last forever, although, at times it seems so. Once our political leaders realize that jobs are the important thing, more important than say health care, gay rights, or even abortion, (and these are all very important issues!) then we can move forward. Once there is a leader that understands economics, we will recover. Why? Because the economy is tied to you, and me, and all of our family and friends. The economy is us, and ultimately if led right, we will understand the importance of being positive on the economy. If you have a job, be grateful, if you don't, be hopeful and continue to look.
And let's hope that the new norm is not middle class fast food jobs. It is the manufacturing jobs that will bring us back. I really don't care if they say we can live without them, these jobs help raise the lower educated and skilled people to their full potential. Seems to be working in China, huh.
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