The Big Drop: Employment Rate Cause for Concern

Friday's labor report is the latest confirmation that our economy is sputtering. A loss of 54,000 jobs and a 9.6 percent unemployment rate are bad enough. But a deeper look, at the little-known civilian employment-population ratio, presents what may be a more revealing and troublesome picture.

In contrast to the better-known unemployment rate, which measures the percentage of adult Americans who are actively seeking jobs but do not have one, the civilian employment-population ratio could be called the employment rate, measuring the percentage of adult Americans who have a job.

The August report, released Friday, pegged the employment rate at 58.5 percent, the same as June and only a tad higher than July's rate of 58.4. These numbers are approaching the dismal employment rates of the early 1980s, when the rate bottomed out at 57.1. Since the start of this summer, nearly 400,000 Americans have entered the labor force, but only 130,000 have found jobs according to the BLS release.

The import of the employment rate is clearer when one compares it and the unemployment rate to data from last August. America's adult population has risen by 2 million people since then, but the number of adults with jobs has dropped by 180,000. The unemployment rate declined slightly despite these numbers, from 9.7 percent to 9.6 percent, because over 2.3 million people have left the labor force entirely, so discouraged they are no longer even looking for work. The employment rate more accurately reflects that despair, sliding down from 59.1 percent to 58.5 percent.

The employment rate has fallen farther and faster in this recession than at any time in the last thirty years. Only a steady and sustained rise in the employment rate will signal a healthy economic recovery.

Henry Olsen is a vice president and the director of the National Research Initiative at AEI.

Note: This feature is based on an article first published in the Wall Street Journal.

Photo Credit: iStockphoto/Slobo Mitic

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Henry
Olsen
  • Henry Olsen, a lawyer by training, is the director of AEI's National Research Initiative. In that capacity, he identifies leading academics and public intellectuals who work in an aspect of domestic public policy and recruits them to visit or write for AEI. Mr. Olsen studies and writes about the policy and political implications of long-term trends in social, economic, and political thought.

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