May 4, 2013

National Journal’s Report on Missing Workers Misstates History of Labor Force Participation Decline

Give Nancy Cook at credit for a generally well-written though somewhat naive report (“Forget the Unemployment Rate: The Alarming Stat Is the Number of ‘Missing Workers’”) on the unprecedented plight of the millions of adults who have dropped out of the labor force.

But in discussing the “glaring caveat” in Friday’s employment report from the government, namely that “the ‘labor force participation rate’ held steady in April at 63.3 percent—the lowest level since 1979,” she missed a major source of the rise in the rate to a record level in the late-1990s. She also left readers otherwise unaware of the actual history with the impression that the rate has been “on a gradual decline” since then, which simply is not the case.

Here are the two relevant excerpts:

Since the start of 2007, the percentage of Americans in the labor market has dropped from 66.4 percent to 63.3 percent. In the 1970s and 1980s, the number of working Americans grew—because of the dramatic increase in women holding jobs outside of the home.

The percentage of Americans in the labor market peaked in the late 1990s with the booming Clinton-era economy. Remember all of the exuberance before the tech bubble burst? Since then, the labor force participation rate has been on a gradual decline.

A reader unaware of the statistic’s history and its degree of fluctuation would likely believe that its percentage was far higher during final years of the previous decade. After all if a three-point, six-year drop is part of an overall “gradual” trend, then the labor force participation rate must have been way above 70 percent during the late 1990s, right?

Wrong, as a graph of that statistic from the government’s Bureau of Labor Statistics shows us:


The seasonally adjusted peak of 67.3 percent actually occurred during the first four months of 2000, gradually declined to 66.1 percent in August 2003. During the next 5-1/2 years, the rate essentially held steady until well after the 66.4 percent January 2007 peak Cook cited, never going below 65.8 percent or above 66.4 percent until February 2009. That’s the first full month after Barack Obama’s inauguration and more than a year after the National Bureau of Economic Research claims the recession began.

The microscopic “gradual change” during that time was 0.00455 percent per month (0.3 percent divided by 66 months). The rate in August 2008 was the same 66.1 percent seen in August 2003.

Combined, the ignored 5-1/2 years of the rate’s stability during the Bush 43 presidency, Cook’s reference to “the booming Clinton-era economy,” her failure to specifically cite the Clinton-era peak so readers could have proper context, and her failure to mention Bush 43 by name give away either a fair amount of sloppinness or bias. I lean towards the latter.

The naive portions of Cook’s work have to do with her belief that there are solutions to the problem based on more government spending, a topic which I may get to in broader form in another post.

Cross-posted at


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