Labor force still shows scars from Great Recession

  • Article by: KEVIN G. HALL , McClatchy News Service
  • Updated: May 11, 2013 - 5:33 PM

Despite improving conditions, one out of five American families reported that no one in the household had a job in 2012.

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A job fair in New York.

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The unemployment rate in April was 7.5 percent, 2 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: Last week the Dow Jones industrial average closed 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 working-age Americans are completely out of the workforce. 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.

There are several aberrations present in today’s labor market.

For one thing, the fact that the unemployment rate has fallen 2 percentage points since June 2009 omits the darker fact that it’s a share of a workforce of 155 million that’s smaller than it was at the start of the recession. If people who have dropped out of the workforce were included, the jobless rate would be higher.

“The fact is that we’re 2.6 million jobs short of where we were at the start of the recession. And that doesn’t even count five years of population growth,” said Chad Stone, chief economist for the Center for Budget and Policy Priorities, a center-left think tank.

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.

Another sign of deep labor-market troubles comes from the Employment-Population Ratio, which measures the proportion of working-age adults who are employed. In April, this ratio was 58.6 percent, versus 63.1 percent in June 2007.

Looked at another way, 41.4 percent of 245.2 million working-age adults, or 101.6 million, weren’t employed in April. That’s more than 100 million people who were in college, retired, independently wealthy or living off family or friends.

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