Labor force participation hasn’t really budged, fuels inflation
Democrat states missing many more workers than Republican-led states
According to President Joe Biden, aside from temporary inflation, the U.S. economy is a well-oiled machine, roaring back from pandemic glitches, and the president underscored his claim with the government’s October jobs report, which showed the economy adding 531,000 new jobs and unemployment tumbling to 4.6 percent.
In Wisconsin, the news was even better. The state’s unemployment rate dropped to 3.2 percent in October, according to the Wisconsin Department of Workforce Development (DWD), while a revision showed September’s rate actually was 3.4 percent, not 3.9 percent as previously reported.
“Yes, there’s a lot more to be done,” Biden said in announcing the report. “We still have to tackle the costs that American families are facing. But this recovery is faster, stronger, fairer and wider than almost anyone could have predicted.”
According to public opinion surveys, many Americans weren’t feeling the same way, and the November jobs report underscores why: The economy added just 210,00 jobs; economist were expecting 550,000. Yes, a lot more work to do, Mr. President.
More than that, beyond the robust jobs numbers and the healthy unemployment rate, there remains a large, lurking concern. Despite low unemployment, businesses can’t find enough workers, and that’s contributing to supply chain shortages, inflation due to higher wages, and a growing number of small business closures and failures.
The disruption in productivity threatens overall economic growth.
Obviously, the the unemployment rate isn’t telling the whole story; rather, the labor force participation rate is a huge and even larger part of the narrative.
Indeed, the unemployment rate by itself is a meaningless number, shorn of context, for it only measures the number of unemployed persons in the labor force, with the unemployed defined as people who do not have jobs but who are actively looking for work or who are currently available for work but not working.
It misses the number of the people who have dropped out of the workforce altogether — those who have quit or have been laid off or otherwise do not have jobs and who are not looking for whatever reason.
To say it another way, generally, the unemployment rate is the number of people actively looking for work but don’t have a job, while the labor force participation rate is the proportion of the working-age population that is either working or actively looking for work.
A look at both the number of people who can’t find jobs and the number of people who have just quit looking paints a broader picture of the labor market.
And, right now, the labor force participation rate is bleak.
To wit, the October jobs report might have been shiny, but under the hood was the dreary labor force participation rate: 61.6 percent compared to 63.3 percent in February 2020, down by almost 3 million people compared to the number in the workforce at the beginning of the pandemic.
For the most part, the number has been stagnant despite the recovering economy. It hadn’t topped 61.7 percent since June 2020 until the November report, and then barely budged to 61.8 percent. The question is why, given all the available jobs.
First, some economists speculate the lack of participation might be due to ongoing fears of catching Covid-19. For instance, health officials observe, job growth unexpectedly slowed in August, adding only 366,000 jobs, and was even worse in September, adding just 194,000 jobs, and even then there were still more jobs than workers.
At the time, the Delta variant was raging. If that was the cause, it could be a gloomy winter for coaxing workers back into the market, given the emergence of the latest Covid-19 variant, Omicron.
It’s way too early to see how that plays out, of course, but it’s doubtful that fear is a major factor in the low participation rate anyway, given the large percentage of people who are either vaccinated or who have natural immunity or understand that most Covid risks are borne by the elderly and the obese and others with existing serious conditions. It might have been a factor early on, but the world around us contradicts the notion that the fear factor is at work now: The streets are alive, and so are malls and restaurants, and stadiums are packed. It’s the workplaces that are empty.
At least in some places. A recent Wall Street Journal analysis shows that labor force participation rates are way lower in Democratic states, where lockdowns took a toll on small businesses and small business jobs. In fact, the WSJ projects that there are 4 million missing jobs in the 23 states with Democratic governors versus only 1.3 million in the 27 states with GOP governors. Case in point: Florida is down from pre-pandemic levels by only 12,000 employed workers, and the labor force has actually expanded by 1.2 percent, while California has bled 950,000 employed workers and suffered a loss of 2.1 workers in the labor force, according to the WSJ.
People in states skewing Democrat may have more people scared to go to work, but lockdowns and their aftershocks have likely posed a bigger obstacle,
Then, too, some conservatives have been taken aback that the expiration of extended unemployment benefits hasn’t drawn more workers back to their offices. The numbers show only a token effect, if any at all. But the Democrats’ arguments that extended benefits didn’t have an impact are wrong. The only thing wrong with the conservative argument was the timing.