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New unemployment numbers do not tell the whole story

The Hill's Congress Blog

By Rep. Kevin Brady (R-Texas) - 02/08/12 04:50 PM ET

Whether we care to admit it or not, 2.8 million more people were still out of work in January 2012 than the 12.8 million officially counted as unemployed.

Our labor force should not be shrinking because people stop actively seeking jobs. It should be increasing because, like 243,000 other Americans this month, there are new payroll jobs for them.

On Friday, February 3rd, the Bureau of Labor Statistics (BLS) announced that the unemployment rate for January 2012 had dropped to 8.3%, down 0.2% from December 2011. While commentators jumped at the opportunity to post the good news that 243,000 new payroll jobs had been created, there seemed to be a missing link. How could just 243,000 new jobs cut the unemployment rate by 0.2%? Creating jobs is a step in the right direction. When we include a few more numbers, the story is not as bright.

According to the BLS, a person must either be employed or unemployed to be counted in the labor force. To be employed, a person must have a job or be self-employed in his or her business or farm. To be unemployed, a person must be jobless, actively seeking a job, and available for work. In January, there were 2.8 million people that had dropped out of what the BLS identifies as the labor force.  Of those 2.8 million, 1.1 million are categorized as discouraged workers that did not actively seek a job in the past four weeks because they believe there are no jobs to be had. The remaining 1.7 million decided not to search for job opportunities in the past four weeks so they could further their education or stay home with the family until the job market strengthens.

Federal Reserve Chairman Ben S. Bernanke said recently, “The 8.3% no doubt understates the weakness of the labor market in some broad sense.” The labor force participation rate, that is to say the number of total people in the labor force out of the total population ages 16 and older, in December 2011 was 64%. That percentage fell to 63.7% in January, down to a percentage not seen since 1982. 0.3% does not seem to be a drastic shift until we include the historical data. In December 2007 when the recession began, the labor force participation rate was at 66.0%. If we were still at this percentage of labor force participation then, hypothetically, the unemployment rate would be 11.4%. 

The two main groups that dropped out of the labor force and ceased their arduous job hunt are those of age 55 and older and those between the ages of 16 and 24. By these statistics, we observe two important facts: (1) the older generation is going back to work, and (2) the younger generation is going back to school. This changes our societal demands. People are staying in school longer, retiring later, and living longer. 

The White House Press Secretary, Jay Carney, misguidedly said, "This increase in the number of people leaving the work force has been a trend and a fact since 2000, because of an aging population, which is not to say this is wholly -- that's not to say that I would wholly disregard as an issue.” Mr. Carney seems to have misread the trend for the older generation. Since the early 1990s we have seen a growing number of those 55 and older steadily going back to work. The older generation is working longer because we are living longer. Since the recession, many investments have lost value, and many older Americans aren’t comfortable living solely off the benefits that the government can provide. Clearly, there is a lack of faith in the economic situation and President Obama’s ability to handle it.

As mentioned before, the sheer fact that we created a net of 243,000 payroll jobs during the month of January was a tremendous stride; however, just to get back to our pre-recession level of payroll employment, we would have to create a net of 232,000 payroll jobs every month for the next two years.

I don’t believe we should have to wait another two years to get back to pre-recession levels of employment. Taxes are scheduled to increase at year-end, and our economy remains vulnerable to external events such as the Euro-crisis. We need new economic policies, and we need them now. 

Rep. Brady serves as Vice-Chairman of the Joint Economic Committee

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