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New 35-year low in labor force participation as unemployment declines

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Labor force participation rate fell to a new 35 year low of 62.8 percent in December, while jobs increased by only 74,000, according to today’s report by the U.S. Bureau of Labor Statistics. This jobs increase was the smallest in three years. Meanwhile, the unemployment rate declined from 7.0 percent to 6.7 percent in December.

Labor force participation declines

The labor force participation rate fell from 63 percent in November to 62.8 percent in December because 387,000 people left the workforce in December. It has not been as low since 1978.

Unemployment rate declines

The good news of the declining unemployment rate was overshadowed by the fact that most of the decline was caused by workers dropping out of the labor force rather than by workers getting jobs.
Another reason for the decline is in the way it is counted. The unemployment rate uses the Household Survey, which estimated 143,000 jobs were added in December. The survey asks people if they are employed, while the jobs report asks companies if they have hired.

Economic growth slows

The jobs report shows that unemployed persons declined by 490,000 in December. That may sound good, but only 74,000 jobs were created as 387,000 people left the workforce. This indicates very little economic growth. Furthermore, most of the job growth was in lower paying retail trade rising by 55,000 jobs in December and temporary help services rising by 40,000 jobs in December. Manufacturing was up by 19,000 and construction employment moved down by 16,000 that same month.

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