The importance of labor force participation.

in economy •  4 years ago 

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The unemployment rate is not just determined by the number of jobs offered but also by the percentage of adults willing to work if they find an acceptable job -- the labor force participation rate. If people are not even looking for work, they aren't unemployed.

The labor force participation rate rose steadily in 1983-89, 1996-2000- and a little bit since 2016.

COVID-19 reduced the labor force participation rate because of fear of work-related health risks, but mainly because state lockdowns often made many jobs virtually illegal (symphony musicians, bartenders, hair stylists. . .).

The labor force participation rate fell 3.2 percentage points from 63.4% in February to 60.2% in April but then rose 1.2 percentage points to 61.4% in July.

If the labor force participation in July had been as high as it was in February the unemployment rate would have been 12.2% rather than the reported 10.2%. But if the participation rate had remained as low as it was in April, the unemployment rate would have been 9% in July.

More labor force participation is better for the economy than less, regardless of its effects on the highly-publicized unemployment rate.

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