The recent labor reports certainly have some encouraging news. New jobs in January estimated at 243,000 and a decline in unemployment to 8.3 percent suggests that the economy might be headed in the right direction. But, another key indicator that doesn’t get the attention of the jobs number or the unemployment rate shows that all is definitely not well.
As the following graph courtesy of the Labor Department demonstrates, the Labor Participation Rate (LPR) continues to decline. The LPR measures the number of people employed or looking for work compared to the total of age eligible population. As the graph indicates, the LPR has been on decline since the recession began, and it made another significant move downward to just 63.7 percent in January. That is the lowest since Carter era recession year of 1981.
The declining LPR is a clear indication that more Americans continue to give up on even finding employment as the failed economic policies of Barack Obama infect the market place with anxiety and uncertainty. A higher LPR indicates more people bringing home a paycheck and greater economic output. Until there is a sustained turnaround in the LPR, any talk of “recovery” is premature.
Labor Participation Rate
Source: Bureau of Labor Statistics http://data.bls.gov/timeseries/LNS11300000
Get the Market Movements in Advance: William's Edge Webinar for Tuesday, March 11th, 2014 | John Ransom