Catholic Journal

Remain Calm, All Is Well

Do you remember the words of Kevin Bacon from the last scene of Animal House?

“Remain calm! All is well!”

But is it?

Let’s keep this as simple as possible and focus entirely on the Employment Status in the Household Survey and what it revealed (on a net basis) moving from February to March 2013.

Unemployed dropped by 290,000, but where did they go?

Employed dropped by 206,000, but where did they go?

Since the Labor Force is equal to the number of Employed plus the number of Unemployed, those 496,000 people simply left the Labor Force — that’s where they went.

In addition, 167,000 came into the Civilian Non-Institutional Population for the month of March, but where did they go since Employed and Unemployed both fell (again, on a net basis)? They were added to the 496,000 that left the Labor Force, bringing us to a total of 663,000 that moved to the Not in the Labor Force category for the month of March.

To put this into perspective, at 63.3%, the Labor Force Participation Rate is at its lowest point since 1978! [Labor Force Participation Rate = Labor Force (Employed + Unemployed) divided by the Civilian Noninstitutional Population]

d5e6bb16358e4162ffff8825ffffe904If the Household Survey continued to report the same numbers for 15 months:

  • The Labor Force Participation Rate would be 59.6%
  • The Employment Population Ratio would be 56.6%
  • The Not in the Labor Force would be just under 100 million.

But what the heck, the U-3 Unemployment Rate would be 5.0%

The point is that so long as we continue to see the Unemployment Rate drop due primarily to folks leaving the Labor Force, there is no recovery in the labor markets.

Edward Derbin

EDWARD DERBIN teaches online courses in economics at UC-Berkley and edits a popular website: EconNewsLetter.com. For years, he and Professor Donald Byrne (now deceased) have enjoyed bringing an increasingly relevant view of the American economic landscape to the public. Professor Derbin holds both M.A. and M.B.A. degrees from the University of Detroit Mercy. Professor Byrne earned his Ph.D. in economics from the University of Notre Dame.