As the media have amply reported, there is a broad consensus that the current job environment in the U.S. economy is the worst since the 1930s. Let’s explore the state of the job market now and one of the most unique features, the lack of job creation on a scale sufficient to reduce unemployment.
This chart (click to enlarge) shows the job market over the past decade, from the U.S. Bureau of Labor Statistics.
The job creation record from 2001 through 2007 was more than 5 million non-farm payroll jobs added, topping out at 137.5 million in January 2008. At that point, the economy entered into recession, with six million jobs lost through mid-year 2009, when the recovery commenced.
Note that the current number of people on company payrolls today is almost equal to the number of payroll job holders 11 years ago. In addition, since January 2001, the U.S. economy has gained a net increase of 12 million people available in the workforce, from 142 million to 154 million.
At present, the number of employed is substantially below the available workers. The BLS uses a category of workers called “discouraged workers” to define a group that, while available for work, are “not looking for employment.” The practice results in an understated unemployment percentage versus the total workforce, as evidenced by the Workforce Participation Rate.
According to BLS data, since 1980, the average Workforce Participation Rate is 65.8%. If we calculate the “unemployed” count to reflect the average participation rate, we find that the more correct figure for unemployment today is more than 17 million workers, or an 11.4% unemployment rate. Compared to the official report of 13 million workers and an 8.5% unemployment rate, the BLS figures grossly understate the unemployment problem. In a quote from a recent Gallup Poll: the practice of “reducing the unemployment rate by driving potential employees out of the workforce is not a solution to today’s job problem or a good sign for the U.S. economy.”
The recovery that officially started in June, 2009 has stalled out, and growth in GDP as well as the job creation process essential to a healthy job market is not happening.