The US Unemployment Rate peaked in 2009 at 10.1% and has since dropped to 8.5%. This is highlighted by many analysts as a sign of recovery. And it has been a sign of recovery in every business cycle in post-WW2 history…but not this time. The Participation Rate is the % of the population that is either working or looking for work. As the economy recovers, the Participation rate rises as people are encouraged to enter the workforce to find jobs. The Participation Rate peaked in 2000 at 65%. In this cycle it has fallen to 58% and has not moved higher as the Unemployment Rate has dropped. This has never happened in post-WW2 history. What is happening is workers are giving up looking for work in a dismal labour market and are no longer being counted as part of the labour force in the official employment survey. If the participation rate was assumed to have remained constant at 63% (average between 1988-2008) the Unemployment Rate would be closer to 12%, unchanged from 2009. In addition, those jobs that are being created are typically lower pay work with limited benefits.
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Yorkville Perspective - November 18, 2011
The US Unemployment Rate peaked in 2009 at 10.1% and has since dropped to 8.5%. This is highlighted by many analysts as a sign of recovery. And it has been a sign of recovery in every business cycle in post-WW2 history…but not this time. The Participation Rate is the % of the population that is either working or looking for work. As the economy recovers, the Participation rate rises as people are encouraged to enter the workforce to find jobs. The Participation Rate peaked in 2000 at 65%. In this cycle it has fallen to 58% and has not moved higher as the Unemployment Rate has dropped. This has never happened in post-WW2 history. What is happening is workers are giving up looking for work in a dismal labour market and are no longer being counted as part of the labour force in the official employment survey. If the participation rate was assumed to have remained constant at 63% (average between 1988-2008) the Unemployment Rate would be closer to 12%, unchanged from 2009. In addition, those jobs that are being created are typically lower pay work with limited benefits.