Four years later, the debate persists as to whether or not the U.S. economy has recovered from the Great Recession. Those who suggest we have cite the drop in the nation’s unemployment rate from 10 percent in October 2009 to 7.3 percent today and the recent record highs seen in the stock market. Being the most reported metrics, these are often championed as hallmarks of recovery. But more scrutiny is required.
Buried in each month’s Bureau of Labor Statistics’ (BLS) jobs report is data that receives scant media coverage due to its abstract nature. A reasonable analysis of these data points reveal an entirely new set of troubles.
First, one must consider the “underemployment” rate. Underemployment is considered to be any work undertaken because a person could not find something in keeping with their knowledge or experience reluctant part-time employment, and discouraged workers. An M.B.A. graduate working as a barista at the local Starbucks is a textbook example of underemployment. In the BLS report, underemployment is known as “U-6.”
As of August 2013, the U-6 was 13.7 percent, or 21.3 million Americans. Digging deeper, we see that among recent college graduates, the underemployment rate is 44 percent. This means that upon graduation from college, the average graduate has a 56 percent chance of finding a full-time job.
The U-6 encompasses the official unemployment rate (“U-3”), the part-time rate (“A-8”) and the marginally attached rate (“U-5”) which itself encompasses the discouraged worker figure (“U-4”). According to the BLS, discouraged workers are defined as those who, “have given a job-market related reason for not currently looking for work.” In other words, because the present job market looks so bleak, these would-be workers have removed themselves from the hunt.
From July to August, the labor force participation rate, which measures how many Americans are participating in the labor force, continued its downward trajectory from 63.4 percent to 63.2 percent.
Of the last 128 months, 72 have seen the participation rate either drop or maintain from the previous month. Between January 2003 and August 2013, the labor force participation rate peaked at 66.5 percent (June 2003) and bottomed out at 63.3 percent (March, April 2013). Between June and July of this year, the labor force saw 312,000 Americans drop out, bringing the total number of Americans not participating to 90 million – just over the combined populations of California, Texas, and Florida.
Consider next the type of jobs being created. Since January 2009 the country has added 1.9 million part-time jobs, but only added a net total of 270,000 full-time jobs. There are many reasons for this, but chief among them is that hiring part-time employees cuts costs, with healthcare being the primary concern. None of this even touches regular drops in hourly wages, downward GDP revisions or, for that matter, continued stagnant growth, all of which paint a questionable picture of an economy in recovery.
What can be said about the unemployment rate decreasing by 2.7 percent since its peak in October 2009? Fewer people are participating in the labor market. When there are fewer observations in a sample, smaller changes have larger impacts. Many observers suggest that without a decline in the participation rate, the unemployment rate would be little changed from the height of the recession.
These are the storylines that go, at best, underreported, but it is all there in the open for the world to see – if they cared to look.
Jeremy Kee is a research associate for the Center for Fiscal Policy with the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.