October - December 2013
U.S. Labor Force Participation in Decline
November 8, 2013 (Washington Post Remix)-Why does labor force participation matter? For one, if people are leaving the labor force for economic reasons (and they're not going back to school), it would mean that the economy is in much worse shape than the official unemployment rate suggests. The official November jobless rate was 7 percent, down from 7.3 percent on October, but that only counts people who are actively seeking work - not labor-force dropouts. The size of the labor force also goes a long way to determining America's growth prospects. If, say, Baby Boomers are retiring faster than expected, then long-run U.S. economic growth will be lower than projected. Even worse, if discouraged workers are dropping out of the labor force entirely, they may never make their way back into jobs. Their skills erode over time. Companies don't even bother to look at their resumes. They essentially become unemployable. That's a massive economic loss. It could also mean the U.S. economy will be significantly weaker in future. One recent paper from the Federal Reserve estimated that America's economic potential is now 7 percent lower than it was before the financial crisis - in part because workers who lost their jobs during the downturn have become less-attached to the labor force.