The U.S. unemployment rate edged down last month from 8.3 to 8.1 percent, but labor market experts were quick to point out that the rate dropped primarily because throngs of workers dropped out of the labor force and were not calculated in the rate.
The U.S. Department of Labor reported earlier this month that the labor force shrank last month by a net total of 368,000, reflecting the difference between the millions of workers who moved into the workforce and those who moved out.
August marked the third month in a row that the national labor force contracted, following a similar trend in Ohio, where the unemployment rate dipped to 7.2 percent from 7.3 percent and the total workforce shrunk by 41,767 over the three months that ended in July — the last month for which figures are available from the Ohio Department of Job and Family Services.
But not everyone who drops out of the labor force has thrown in the towel on their job searches as some economists and political pundits imply when they routinely refer to those leaving the labor market as people who have given up looking for work because they can’t find a job.
In fact, a large number of people who dropped out of the workforce had jobs but decided to go back to school for more training and education, while others stop working to raise children, care for elderly or disabled relatives or simply retired. The Bureau of Labor statistics reported that a total of 1.7 million people were not counted as part of the labor force last month because they were attending school or handling family responsibilities.
While millions of people dropping out of the labor force each month is “nothing to celebrate,” blaming the shrinking workforce entirely on a lack of economic opportunity can be misleading, said Paul Conway, former Labor Department chief of staff and president of Virginia-based Generation Opportunity, a non-profit dedicated to helping those ages 18-29 get jobs.
“To say that people have given up is less than clear because you do have some people who will take voluntary retirement and that type of thing,” Conway said. “But given the trend line of the data, when you have more and more people dropping out of the labor market, they’re not all going back to school.”
It is difficult to conclude what portion of the drop in labor force, and thus the unemployment rate, is attributable to workers who are “discouraged” — an official labor market term describing those who have not looked for work in a month because they either cannot find a job or think no jobs are available.
But a post-recession survey of labor force dropouts conducted in 2010 by the Ohio jobs department offers some clues.
The survey found about half the respondents quit the labor force because they were discouraged, but more than a third (36 percent) said they dropped out to go back to school or take care of family responsibilities.
A smaller segment said they left the labor force, not because they could not find work, but because they did not meet the educational or training requirements of most jobs. Despite high unemployment, the BLS recently reported there are about 3.7 million jobs still open, largely because of the gap in employers’ requirements and applicants’ qualifications.
“When people drop out of the labor force it doesn’t always mean that they’re discouraged or unwilling to work,” said Bill LaFayette, a Columbus-based labor economist. “And they could be back in the workforce at the drop of a hat if the right opportunity comes along, especially for those with the skills that employers are looking for.”
Still, that is little consolation for many Ohioans struggling to find jobs even with solid work histories and educations.
Beavercreek resident Lisa Monaghan, 43, was laid off from her job as a purchasing manager for a shipping company in 2010. About a year later, she landed a contract job as a logistics coordinator with a large firm in the area, but her contract ended in the spring.
“I was filing out about 20 applications a day when I first got laid off, and I couldn’t get a job at Starbucks,” Monaghan said. “It was nice to have work for about a year, but I was making less than half of what I was making in my previous job. At this point, I’m living with my mother and seriously contemplating bankruptcy.
“You keep hearing that things are gradually improving; well, if it takes much longer for my situation to improve, it will be too late,” she said.
Even if the job market is not quite as bleak as labor force participation rates might indicate, the economy still is not creating nearly enough jobs to bring unemployment back down to pre-recession levels.
It would take job creation of about 250,000 to 300,000 a month to accomplish that feat, by most analysts’ estimates. Last month, the U.S. employers added a meager 96,000 jobs to the economy, the Labor Department reported.
“You have to look at the (labor force) number in the context of how it appears with job creation,” Conway said. “The dropout number should not be looked at as people who are happy with their station in life or just not aggressive about looking for a job. The economy is just not growing fast enough to absorb new entrants to the workforce let alone those that are unemployed.”
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