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Labor Force Participation Rate continues to decline

At 62.7%, lowest since 1978
By Masao Suzuki |
October 8, 2014
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San José, CA - On Oct. 3, the Department of Labor released their report on the job market for September. The report showed that the Labor Force Participation Rate (LFPR), or the percentage of adults either working or looking for work, continued to decline, and hit a low not seen since 1978. Almost 100,000 jobless workers gave up their job search and left the labor market, helping the unemployment rate to go down to 5.9%, the lowest since summer of 2008.

Hardest hit by the drop in labor force participation were young people, 16 to 24 years old, who have seen their LFPR drop by 4.3 percentage points since the recession began in December 2007, much more than the 3.3 percentage point overall fall. Youth also suffer from the highest unemployment rate, at 13.7%, and their unemployment rate has risen the most, 2 whole percentage points, since the recession began.

Another sign of a weak labor market was the small increase in weekly wages, which were up only 2% from a year ago, barely enough to cover rising prices. This low rate of increase in weekly wages shows that workers are still at a disadvantage and are not able to get higher wages, even though the overall economy has been growing for more than five years.

While the labor market was half empty, looking at the weak labor force participation rates and weekly earning, it was also seen as half full, at least by the mainstream media, given the drop in the unemployment rate and the 248,000 new jobs added. The stock market reacted positively with large gains after days of losses. The report was seen as good for corporate profits: the increase in new jobs showed that the economy was still growing, that there was no recession on the horizon, and sales would continue to rise. At the same time, the weak growth in wages means that labor costs won’t be pressuring profit margins and corporate profits.