WASHINGTON — Don’t let the soaring stock market and applause from politicians over a slight dip in the unemployment rate fool you. A deeper dive into government data underscores just how bleak the picture still is in today’s labor market.
The unemployment rate in April was 7.5 percent, 2 full percentage points below where it stood at the end of the Great Recession in June 2009. The Obama administration touts the creation of 6.8 million jobs in the past 38 months. At the same time, the stock market has roared back from recession depths, the Dow Jones index of industrial stocks this week closing above 15,000 for the first time.
On the face of it, this is good news.
But the improving headlines mask a scarred labor market. One out of five American families reported last year that not a single family member had a job. About 102 million Americans are completely out of the work force. And by a number of measures, participation in the labor market remains at or near modern lows.
“Most of the improvement that we’ve seen in the unemployment rate hasn’t been due to increased job opportunities. It’s been due to people dropping out of, or never entering, the labor market because of weak opportunities,” said Heidi Shierholz, a labor economist for the Economic Policy Institute, a liberal think tank. “Most of that decline is not coming from what would really be considered meaningful improvement in the unemployment rate.”
There are several aberrations present in today’s labor market.
For one thing, the fact that the unemployment rate has fallen 2 full percentage points since June 2009 omits the darker fact that it’s a share of a work force of 155 million that’s smaller than it was at the start of the recession. If people who have dropped out of the work force were included, the jobless rate would be higher.
One explanation is that there are a smaller number of people in the job market, either employed or looking for work, when counted as a percentage of the total working-age population.
In recent decades, about 67 percent of the working-age population has been in the job market, the labor force participation rate.
In April, just 63.3 percent were in the job market. That’s well below the 65.7 percent at the end of the recession in June 2009, and from the 66 percent in June 2007, more than a year before the U.S. financial crisis.
Even with the 528,000 additional workers in the labor force since June 2009, the actual percentage of Americans participating in the labor force in April contracted by 2.4 points.
The labor force participation rate was already weakening before the Great Recession. The 2000-2007 economic expansion that followed the prior recession was dubbed a jobless recovery, in part because of the lagging recovery of the labor force participation rate.
Another sign of deep labor-market troubles comes from the Employment-Population Ratio. It reflects the proportion of working-age adults who are actually employed.
In April, this ratio stood at 58.6 percent, vs. 59.5 percent in June 2009 and 63.1 percent in June 2007.