The December employment report released this morning by the Bureau of Labor Statistics showed the excessive optimism in recent weeks about strong acceleration in the labor market is likely misplaced. In her analysis, EPI Economist Heidi Shierholz notes that while the unemployment rate dropped from 7.0 percent to 6.7 percent in December, most of the improvement was not for “good” reasons. Instead, the drop was due to potential workers dropping out of, or never entering, the labor force because job opportunities are weak. The share of the working-age population with a job did not increase in December and the labor force participation rate dropped back down to its lowest point in more than 35 years.
Further, the number of “missing workers” increased from 5.6 million to 6.0 million. (Missing workers are jobless workers who are not actively seeking work but who would be either employed or looking for work if job opportunities were stronger, after accounting for longer-run demographic trends.) If these workers were in the labor force looking for work, the unemployment rate would be 10.2 percent instead of 6.7 percent.