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SHAPIRO: What the jobs numbers don’t say

Declining labor-force participation indicates discouraged workers

- - Tuesday, December 24, 2013

At first glance, the numbers in the November jobs report were encouraging. After a dismal October report, which included the government's 16-day shutdown, unemployment dropped to 7 percent in November — its lowest rate in five years. However, we shouldn't get so caught up in the excitement over this report that we ignore the deeper, troubling trend, which is highlighted in a recent item from George Mason University's Mercatus Center. The labor-force participation rate is still near its lowest point in 35 years, and has been in steady decline since the Great Recession began.

The labor-force participation rate includes all Americans 16 or older who either have a job or have actively sought one in the past four weeks. Those who have not pursued work in the past four weeks are no longer counted as "unemployed" — they simply don't show up in the job numbers at all. Right now, the number of people working or actively seeking a job is a depressingly low 63 percent — down from 66 percent back in 2007. While November saw a very slight improvement in labor-force participation from the October numbers, these numbers have not been this low since April 1978, during Jimmy Carter's administration.

While the government-defined unemployment rate remained relatively steady, that number only tells part of the story. In fact, there are now 91.5 million Americans who are not in the labor force. Granted, some of this can be explained by demographics. The baby-boomer generation is getting older and retiring, leaving fewer younger workers to step up and fill the gaps. After the recession, many young people are going to school full-time, which means they will be returning to the work force eventually, with higher earning potential. However, according to Business Insider, you have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening in Washington. The store received 23,000 applications for just 600 positions.

Yet, too many of the people no longer counted in the labor force have simply given up on finding a job after months and even years of sending out resumes without success. Millions are unemployed and desperate for work, but are not counted as unemployed as they have been unemployed too long or are recent college graduates. Indeed, 5.6 million Americans between 18 and 34 can't find a job, even though they want one.

Moreover, many Americans have lost confidence in their ability to find a job. They're stuck between a rock and a hard place: Many employers won't even look at a resume if a person has been out of work for six months or more. They worry that people who have been out of work will have lost necessary skills, or that they will take anything in desperation, but will leave the job as soon as a better offer comes along.

It doesn't help people in their job search that the labor market remains sluggish. While jobs continue to be added, the recovery has been very slow. As of last month, there were still 1.9 million fewer jobs than there were when the recession started. Government rules and tax burdens continue to stifle job growth. Uncertainty about Obamacare also has many employers opting not to create new jobs. While participation in the labor-force continues to slide, policies make it harder for companies to open up positions to new workers.

At the same time, well-meaning government programs encourage people to stop looking for work. Too many able-bodied people have decided to go on welfare, rather than continuing to try to find jobs. The number of people receiving disability pay has steadily increased. By the end of August, there were 14 million people receiving disability benefits, compared to 5.3 million in 2001 and 7.1 million in 2007. Welfare pays more than minimum wage in 35 states, giving people an incentive not to work. While it's important that we take care of the most vulnerable among us, people should not be incentivized to game the system. Simply requiring those receiving unemployment benefits to give back to their communities by volunteering with nonprofit organizations for a few hours a week would aid nonprofits, teach skills and cut unemployment insurance.

The sluggish labor-force participation rate is an often-overlooked aspect of the economic recovery, but it's a key indicator of where things really stand. In fact, Federal Reserve Bank of Chicago President Charles Evans agrees it plays a bigger role in illustrating our economy's job-creating function than we often admit. While unemployment dropped from a high of 10 percent in October 2009, to 7 percent last month, those numbers don't reflect college graduates who can't enter the job market, as well as the millions of Americans who have simply given up.

This is not the American dream. People need the sense of purpose and accomplishment that comes from having a good job. Is it too much to ask our policymakers to give job creators reasons to hire rather than new expenses and burdens so they don't?

Gary Shapiro is president and CEO of the Consumer Electronics Association.