The Truth About American Unemployment

How to Grow the Country’s Labor Force

Skills to pay the bills: iron-working apprentices training in West Virginia, March 2012. Jason Cohn / Reuters

In the wake of the financial crisis of 2008 and the Great Recession that followed, many economists worried that even if the U.S. economy improved, unemployment would remain high for years to come. Some warned darkly of a “jobless recovery.” Those fears have proved unfounded: since peaking at ten percent in October 2009, the U.S. unemployment rate has fallen by half and is now lower than it was in the years leading up to the crisis. Beyond the basic unemployment rate, a broad range of evidence shows that the labor market has largely returned to good health. Compared with earlier in the recovery, far fewer workers are underemployed or underutilized. Long-term unemployment has fallen steadily, from an all-time high of four percent of the labor force in early 2010 to just over one percent today. And adjusting for inflation, average hourly wages have been increasing for more than three years.

Yet one aspect of the labor market has stubbornly refused to improve: the labor-force participation rate. The share of Americans at least 16 years old who are working or looking for work remains three percentage points lower today than it was prior to the onset of the recession in December 2007. This is the case even though the unemploy­ment rate has improved, because the unemployment figure does not include those who have left the work force altogether.

Most of the decline in the labor-force participation rate has resulted from a large retirement increase that began in 2008. That year, the oldest baby boomers turned 62 and became eligible for Social Security. An aging population, however, cannot fully account for the drop: labor-force participation is down even among prime-age adults—those between the ages of 25 and 54.

That decline is not unique to this particular economic recovery. Instead, it is the continuation of a troubling pattern that began among men more than 60 years ago and among women about 15 years ago. In 1953, 97 percent of prime-age American men participated in the labor force; today, that figure is down to 88

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