When Can We Be Sure Labor Force Participation Is Healthy Again?
The good news is, today’s jobs report was positive overall. February’s gain of 295,000 jobs continues a favorable trend. At this rate, economy will return to pre-recession labor market health in about two years.
One thing about this month’s report was different, however. As I noted yesterday, my expectation for coming months was for the unemployment rate to hold steady, or at least fall relatively slowly, given the underlying pace of job growth. This was because I expected more prime-age workers to re-enter the labor market as it improved. Given this, I was a little surprised by the 0.2 percentage point drop in the unemployment rate last month. This drop in unemployment was primarily because the labor force shrank, as employment growth in the household survey was just 96,000. (Admittedly, the household survey is far more volatile than the establishment survey, so month-to-month changes should be taken with a grain of salt.)
My guess is that the overall trends I highlighted yesterday are more likely to hold in coming months: participation will firm up, making the unemployment rate fall less slowly than the pace of job growth might normally make us expect. That’s what we saw in January and I think that trend will continue in the upcoming months, even if it didn’t hold this month.
As the economy adds solid numbers of jobs, we have also seen the employment-to-population ratio of prime-age workers slowly rising. This is a definitely a positive sign, but it is also clear from the figure below that we have a long way to go before we get back to the labor force that prevailed before the recession.
Employment-to-population ratio of workers ages 25–54, 2006–2015
| Month | Employment to population ratio |
|---|---|
| 2006-01-01 | 79.6% |
| 2006-02-01 | 79.7% |
| 2006-03-01 | 79.8% |
| 2006-04-01 | 79.6% |
| 2006-05-01 | 79.7% |
| 2006-06-01 | 79.8% |
| 2006-07-01 | 79.8% |
| 2006-08-01 | 79.8% |
| 2006-09-01 | 79.9% |
| 2006-10-01 | 80.1% |
| 2006-11-01 | 80.0% |
| 2006-12-01 | 80.1% |
| 2007-01-01 | 80.3% |
| 2007-02-01 | 80.1% |
| 2007-03-01 | 80.2% |
| 2007-04-01 | 80.0% |
| 2007-05-01 | 80.0% |
| 2007-06-01 | 79.9% |
| 2007-07-01 | 79.8% |
| 2007-08-01 | 79.8% |
| 2007-09-01 | 79.7% |
| 2007-10-01 | 79.6% |
| 2007-11-01 | 79.7% |
| 2007-12-01 | 79.7% |
| 2008-01-01 | 80.0% |
| 2008-02-01 | 79.9% |
| 2008-03-01 | 79.8% |
| 2008-04-01 | 79.6% |
| 2008-05-01 | 79.5% |
| 2008-06-01 | 79.4% |
| 2008-07-01 | 79.2% |
| 2008-08-01 | 78.8% |
| 2008-09-01 | 78.8% |
| 2008-10-01 | 78.4% |
| 2008-11-01 | 78.1% |
| 2008-12-01 | 77.6% |
| 2009-01-01 | 77.0% |
| 2009-02-01 | 76.7% |
| 2009-03-01 | 76.2% |
| 2009-04-01 | 76.2% |
| 2009-05-01 | 75.9% |
| 2009-06-01 | 75.9% |
| 2009-07-01 | 75.8% |
| 2009-08-01 | 75.6% |
| 2009-09-01 | 75.1% |
| 2009-10-01 | 75.0% |
| 2009-11-01 | 75.2% |
| 2009-12-01 | 74.8% |
| 2010-01-01 | 75.1% |
| 2010-02-01 | 75.1% |
| 2010-03-01 | 75.1% |
| 2010-04-01 | 75.4% |
| 2010-05-01 | 75.1% |
| 2010-06-01 | 75.2% |
| 2010-07-01 | 75.1% |
| 2010-08-01 | 75.0% |
| 2010-09-01 | 75.1% |
| 2010-10-01 | 75.0% |
| 2010-11-01 | 74.8% |
| 2010-12-01 | 75.0% |
| 2011-01-01 | 75.2% |
| 2011-02-01 | 75.1% |
| 2011-03-01 | 75.3% |
| 2011-04-01 | 75.1% |
| 2011-05-01 | 75.2% |
| 2011-06-01 | 75.0% |
| 2011-07-01 | 75.0% |
| 2011-08-01 | 75.1% |
| 2011-09-01 | 74.9% |
| 2011-10-01 | 74.9% |
| 2011-11-01 | 75.3% |
| 2011-12-01 | 75.4% |
| 2012-01-01 | 75.6% |
| 2012-02-01 | 75.6% |
| 2012-03-01 | 75.7% |
| 2012-04-01 | 75.7% |
| 2012-05-01 | 75.7% |
| 2012-06-01 | 75.7% |
| 2012-07-01 | 75.6% |
| 2012-08-01 | 75.7% |
| 2012-09-01 | 75.9% |
| 2012-10-01 | 76.0% |
| 2012-11-01 | 75.8% |
| 2012-12-01 | 75.9% |
| 2013-01-01 | 75.7% |
| 2013-02-01 | 75.9% |
| 2013-03-01 | 75.9% |
| 2013-04-01 | 75.9% |
| 2013-05-01 | 76.0% |
| 2013-06-01 | 75.9% |
| 2013-07-01 | 76.0% |
| 2013-08-01 | 75.9% |
| 2013-09-01 | 75.9% |
| 2013-10-01 | 75.5% |
| 2013-11-01 | 76.0% |
| 2013-12-01 | 76.1% |
| 2014-01-01 | 76.5% |
| 2014-02-01 | 76.5% |
| 2014-03-01 | 76.6% |
| 2014-04-01 | 76.5% |
| 2014-05-01 | 76.4% |
| 2014-06-01 | 76.8% |
| 2014-07-01 | 76.6% |
| 2014-08-01 | 76.8% |
| 2014-09-01 | 76.8% |
| 2014-10-01 | 76.9% |
| 2014-11-01 | 76.9% |
| 2014-12-01 | 77.0% |
| 2015-01-01 | 77.2% |
| 2015-02-01 | 77.3% |
Source: EPI analysis of Bureau of Labor Statistics' Current Population Survey public data series.
As the millions of workers who have been sidelined by weak labor market opportunities return to the labor market, some will find work and some won’t. That’s where the stubborn unemployment rate fits in. But, if the unemployment rate holds steady or even increases slightly in coming months, it could actually an encouraging sign if means that potential workers see hope for themselves in the labor market and have started to look for jobs.
Enjoyed this post?
Sign up for EPI's newsletter so you never miss our research and insights on ways to make the economy work better for everyone.