Economy

Jobless Rate Would Be 10.4% If 'Missing' Workers Counted

Mark reported earlier on the all-important December employment numbers. As he reported, the December unemployment rate was clocked at 10 percent, unchanged from November.

But as Heidi Shierholz of the liberal the Economic Policy Institute think tank, points out, the rate would have risen four percentage points higher if so many discouraged would-be workers hadn't stopped looking for employment.

Unemployment held steady at 10.0%, but only because the labor force declined by well over half a million (661,000) workers in December. If those workers had been in the labor force and counted as unemployed, the unemployment rate would have risen to 10.4%.

It's typically the case every month that if job force dropouts were counted as unemployed the jobless rate would be higher, but it's still an interesting factoid.

Updated at 1:10 pm ET — Just received a more in-depth analysis by Shierholz from EPI. She discusses the problem of millions of missing workers who have either dropped out of the workforce or decided not to enter during the workforce.

The problem is that as the economy improves and many of those people enter the workforce, they will put upward pressure on the unemployment rate.

An excerpt:

Since the start of the recession in December 2007, the labor force has declined by a total of 810,000 workers. This includes an increase of 1.2 million from December 2007 to May 2009 and a decrease of 1.9 million from June 2009 to December 2009. Adult men made up two-thirds of the decline in the adult labor force from June to December of last year.

Given population growth from December 2007 to December 2009, we would have expected the labor force to increase by around 2.8 million over this period. This means that there are now roughly 3.6 million "missing workers," that is, workers who dropped out of (or never entered) the labor force during the downturn. When the recovery begins to take hold and these missing workers start entering or reentering the workforce in search of jobs, it will put strong upward pressure on the unemployment rate.

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