Unemployment Line.JPG

(File Photo | The Grand Rapids Press)



Earlier this month, the U.S. Department of Labor announced the creation of 203,000 net new jobs in November, and an official unemployment rate that had fallen to 7.0 percent, down from 7.3 percent in October. ABC News was typical of most mainstream media, headlining the news as "Solid U.S. Job Growth …"



Unfortunately, buried in the details of these monthly unemployment reports is a little understood, recent, and powerfully negative development too often hidden from the headlines. Beginning in 2009, the labor force participation rate began to steadily decline for the first time in twenty years, hiding millions of displaced workers outside the official tabulation of the unemployed. Including these people in the official unemployment rate for this year sends it to well over 10 percent, an annual rate of national joblessness that has not been so bad since before U.S. entry into World War II more than 73 years ago.



That's exactly how we should look at it.



"Labor force participation" is how the Labor Department defines the percentage of working-age adults in the labor force, either with a job or hunting for one. In 1941, the year we entered World War II, women did not participate as much in the workforce and the participation rate was 56 percent. The War itself began to change this, and subsequent decades led to steady increases in the participation rate. By 1989, as the Cold War was winding down, 65.9 percent of working age adults were in the labor force, about two of every three.



And there it stayed, fluctuating between 66 and 67 percent, for the next two decades. The definition of a healthy, normally functioning American economy became one in which about 2 out of 3 working age adults was employed or trying to be.



That changed with the "Great Recession." When President Obama took office in January 2009, the participation rate had already fallen to 65.5 percent, then a 20 year low. But as of last month, it was down to 63 percent, an annual rate unseen since 1978.



Measured just against the 65.5 percent participation that existed when the President took office, our real unemployment rate has zoomed upward by three full percentage points, not gone down. The January 2009 unemployment rate was 7.6 percent. But if 65.5 percent of working age adults were still in the labor force last month, as they were in 2009, our official unemployment rate would now be 10.6 percent.



That's 6.2 million more out of work but not counted. Count them, and the number of currently unemployed shoots from 10.9 million up to 17.1 million. Failing to count them hides the true state of our economy.



The result: Unemployment will appear stubbornly high in later months and years because it isn't being counted accurately the first time. Any modest job growth - such as we experienced last month - will get partially or fully wiped out by an increase in the participation rate as millions of uncounted unemployed trickle back in.



Last month's gain of 203,000 jobs isn't "solid." It's the bare minimum needed to keep us from backsliding. For example: The October jobs gain was 200,000, yet led to the participation rate falling lower in comparison to September, and the unemployment rate clicking slightly higher.



A truly health economy, where at least 2 out of 3 working age adults is in the labor force, will take jobs gains of well over 200,000 every month. We are still far from that pace.

Ken Braun was a legislative aide for a Republican lawmaker in the Michigan House and worked for the Mackinac Center for Public Policy. He has assisted in a start-up effort to encourage employers to provide economic education to employees, and is currently the director of policy for InformationStation.org. His employer is not responsible for what he says here ... or in Spartan Stadium on game days.

