The 14.7% unemployment figure released last week was bad enough, but even worse news was tucked inside the Labor Department’s report: The labor force participation rate tumbled to 60.2%, the lowest rate since 1973, when women were joining en masse.
All of the numbers from the first full coronavirus-infected labor report were shocking.
April had the worst unemployment rates on record for every major demographic save black workers. The employment-to-population ratio is the lowest in records dating back to 1948.
If prognosticators are right, the unemployment problem will get even worse. The Congressional Budget Office says the participation rate — those 16 and older who are either working or seeking a job — will slip to 59.8% over the summer. It hasn’t been below that rate since 1969.
“Whenever you hit a threshold like that, it certainly is significant,” said Brian T. Kench, dean of the College of Business at the University of New Haven.
In Washington, the politicians lined up on predictable sides. Republicans said the historically bad numbers were more reason to find ways to open the economy, as safely as possible.
President Trump, whose three years of relatively strong economic advancements have disappeared in weeks, said the country will “have to start all over again.
“It’s going to be a transition to greatness,” he said at the White House.
Democrats, meanwhile, said Mr. Trump has bungled the response to the coronavirus, leaving Americans feeling uncertain and unsafe. Until they have confidence they can return to the workforce with little chance of infection, the economy will remain moribund, they said.
Economists pondered how much of the joblessness will snap back once the economy gears up and how much is likely to be persistent.
“Does every job that was furloughed come back? It’s an open question,” said Mr. Kench.
He said companies are quickly learning about their core business needs and figuring out where they were bloated before the pandemic. Other companies are learning that they are just not solvent anymore. If they succumb, those jobs probably aren’t coming back.
The same thing happened during the Great Recession, when businesses looking for cuts axed older men from their payrolls. Economists dubbed it the “Mancession.”
Some of those who were old enough chose early retirement, taking them out of the labor force before they planned. That didn’t necessarily change long-term numbers, but it did shape the demographics of the workforce, said Stephanie Aaronson, vice president and director of the economic studies program at the Brookings Institution.
The labor force participation rate peaked at 67.3% in 2000, just as the dot-com bubble was bursting. It hovered at about 66% through President George W. Bush’s tenure and then began a steady slide during President Obama’s term, after the Great Recession, and hovered just below 63% when he left.
Under Mr. Trump, participation ticked back up and reached 63.4% in February. The coronavirus outbreak then sent the rate plummeting to 60.2% and headed down to 59.8% this summer, CBO says.
Those few percentage points may not seem like much, but the CBO says it accounts for 28 million people who will no longer be in the labor force.
Fewer people in the labor force generally means a smaller base of taxpayers working to support those using social safety net programs — what economists call the “dependency ration.”
A short-term blip is unlikely to do much damage, but the longer the participation rate remains low, the more dangerous it is to the health of the economy and the government’s finances.
CBO projects that most workers chased from the labor force will rejoin by the end of next year, but not all. Some 6 million fewer people will be in the labor force compared with projections earlier this year.
Ms. Aaronson said she doesn’t make much of the comparison with the labor force of the 1970s.
For one thing, she said, the number of people out of the labor force could be particularly high because of shutdown orders. Parents who find themselves at home caring for children not in school may not be looking for work, so rather than unemployed, they show up in the numbers as out of the labor force.
The downturn also doesn’t explain the long and fairly steady slide in participation rates since 2000, but Ms. Aaronson said history suggests some things to look for.
During the Great Recession, some people with young children decided to stay out of the workforce longer.
This time, Ms. Aaronson said, COVID-19’s devastating impact on nursing homes could persuade some people pushed out of the labor force to stay out and take care of their parents themselves.
She called those “sticky” factors that affect people’s decisions, “not necessarily permanently but for several years.”
“We don’t know yet what the economy’s going to look like afterwards,” Ms. Aaronson said. “What’s schooling going to look like? What’s child care going to look like? So it’s hard to say what changes there are going to be in labor participation.”
Workers themselves appear somewhat optimistic that they are out only for the short term.
Of the immediate job losses the Labor Department recorded in March and April, about 20 million of them were deemed “temporary” layoffs. Only about 3.5 million were “permanent job losers,” in Labor’s verbiage.
But Mr. Kench pointed to the four years it took to move the participation rate a couple of percentage points after the Great Recession.
“There’s a lot of behavioral stuff that’s going to happen that’s going to slow the snapback,” he said. “I’m more pessimistic. I don’t see a quick snapback.”
He added, “The virus is in charge, is the short answer.”
⦁ Dave Boyer contributed to this report.