New BLS Data Add to Bad Labor Market Story
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New BLS Data Add to Bad Labor Market Story

New employment data released Wednesday threw yet another grenade into the explosive controversy following last week’s report on September unemployment numbers. The Job Openings and Labor Turnover Survey (or JOLTS) showed that since December 2007 there has been a net loss of 4.67 million jobs. But as scary as that number is, it does not tell us much on its own, any more than single data points like 7.8 percent (official unemployment), 14.7 percent (unemployment including workers who stopped looking for a job), or 114,000 (number of jobs created in September). To understand what these numbers mean and whether employment opportunities are truly getting better or not, we need to view them in the context of long-term labor market trends. There are three important trends we think are worth considering: changes in the labor force participation rate and labor turnover rate, unemployment’s relationship to Gross Domestic Product (GDP) and productivity growth, and the huge swing in the ratio of full- to part-time workers.

The first set of trend lines to consider come from data related to the proportion of civilians looking for work, and measures of how many Americas are holding on to a job. Yesterday’s JOLTS report showed the 4.67 million lost jobs, which is better than the 8.62 million net lost jobs number between December 2007 and December 2009, but is still a very slow recovery in employment. At this rate it will be several more years before we get back to those late 2007 employment levels – and even then we’ll need to add more to keep up with population growth since then.

The problem is that the rate of jobs being added to the economy has slowed considerably in the past few years. Consider the civilian employment-population ratio, which is the percentage of people with jobs relative to the population. From December 2007 to 2009, the ratio fell more than 7 percent, and since then it has remained fundamentally flat, averaging at 58.4 percent of the civilian population with employment.

Consistent with this decline has been the widely highlighted drop in the percentage of workers in the labor force relative to the population. The “labor force participation” rate – which includes workers who don’t have jobs but want to work – has fallen every quarter since the second quarter of 2008, ending the third quarter of 2012 at 63.6 percent. To put that in context, the labor participation rate has not been this low since the early 1980s. The fact that the labor force participation rate has not been at such low levels in 30 years suggests that there is a large amount of productive labor going unused, masking how bad unemployment really is.

Next, let us look at unemployment numbers contrasted with GDP data. Historically, GDP and the unemployment rate are negatively correlated – so if GDP goes up, then unemployment generally goes down. Right now GDP growth, to the degree that it is a half way decent measure of the American economy, is stagnant and just about every forecaster from private groups to the Federal Reserve has a negative outlook on GDP over the next several months and even years. This does not bode well for the job market.

Following trends backward to 1982, data shows that unemployment had a peak similar to what we saw in 2009. The Reagan recovery quickly followed that peak in 1982, but even in the midst of a sizeable economic boost it took more than five years for unemployment to get down to 5.8 percent. We are only three years out from the 2009 unemployment peak and the Obama “fauxcovery” is nothing like the boom years of the 1980s. We are highly unlikely to see robust employment prospects return any time soon while facing the current economic climate.

Productivity growth, usually a positive sign for the economy, is likely to have a negative effect on the demand for employees when comparing it to trends in GDP growth and the unemployment rate. Since 1948, each time that the productivity growth rate has exceeded the GDP growth rate for an extended period the unemployment rate has risen. The reverse of this trend is confirmed by recent data from the Bureau of Economic Analysis and Bureau of Labor Statistics showing that, from the first quarter of 2010 to the first quarter of 2012, the GDP growth rate was higher than the productivity growth rate, correlating with the falling unemployment during that time. However, as of the second quarter of 2012, GDP growth has fallen below the productivity growth rate. If this trend continues it would suggest there is trouble ahead in the labor market.

The third and final set of trend lines to consider is related to the types of jobs in the economy today. John Mauldin pointed out earlier this week that since the broader “U-6” measure of unemployment – which adds to the official count of unemployed workers who have been so discouraged they stopped looking for work in the last month – remained unchanged in the September jobs report; that the fall in official unemployment from 8.1 percent to 7.8 percent had to come from the addition of large numbers of part-time jobs, instead of full time work.

This is less than surprising when you look at the trend in the proportion of full-time versus part-time workers. Since December 2007 the proportion of workers working full time to part-time fell and has since remained flat, meaning that more people in the workforce have been working part-time. Looking at Current Population Survey data dating back to 1968, this is the worst full- to part-time job ratio on record – about 2.4 part-time for every 10 full time workers. The Bureau of Labor Statistics jobs report further suggests that these are involuntary part-time workers, as the number of involuntary part-time workers (those working part-time for economic reasons) rose from 8 million to 8.6 million from August to September.

A few single data points that cover a limited time period do not show the severity of damage that this recession has caused the labor force. With a weak economy, it will be challenging for employment to expand quickly, and the negative impact on output caused by the decline in the labor force will cycle back; thus making the situation worse. The huge increase in part-time workers in the labor force is a trend that has not been seen in the wake of past recessions, suggesting a completely new labor market framework. Recovery periods after recessions in the past few decades compared to the present state of employment show the magnitude of pressures against real improvements in the labor market. Such stark differences in the labor market environment signal to optimists about the future of the labor market that they should proceed with caution.

Katie Furtick ( is a policy analyst and Anthony Randazzo ( is director of economic research at Reason Foundation. This first appeared at