Snapshot: Why the drop in the unemployment rate isn’t what you think

Unemployment in November dipped to 8.6 percent, its lowest point since March 2009, down from its 10.1 percent recession high in Oct. 2009. The unemployment rate fell because the share of the population seeking work or working—the labor force participation rate—has fallen considerably. We know this because the share of the population employed last month—58.5 percent—is the same as when the unemployment rate peaked. The lack of change in the share of the population employed—known as the employment-to-population ratio—indicates that the growth in employment has only kept pace with the growth of the working-age population. The figure shows the erosion in the labor force participation rate of people age 25 and older by education level over the last two years.

For the 8 percent of the labor force who have not completed high school, there was no real fall in labor force participation as the small decline from 2009–10 roughly offset the small increase from 2010–11. In contrast, labor force participation of those with a high school degree or some college declined by 1.6 percentage points, with the greatest decline occurring in the last year. There was a somewhat smaller but still sizeable 1.3 percentage-point decline in labor force participation of those with a college degree or further education (such as a master’s or professional degree). Thus, this deep recession led to a widespread shrinkage of the labor force that encompasses all but the least-educated workers.

  • Anonymous

    In 2000 the percent employed was 64.4, versus 58.5 of last month and last two years, that’s 14.4 million missing jobs, and add the then unemployed 5% to the 14.4 million unemployed, the real U3 is about 14%. For twenty years, 1980 to 2000 the percent averaged around 62. In the past ten years we have fewer private sector employees than in 2000, 109 million vs. 110 million. The American jobs machine is in reverse, the private sector is in a depression. Recovery means “self-sustaining growth”, we have the opposite. Time for a major federal jobs program, as the EPI proposes.