Feb 09 2012 -
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%.