A closer look at jobs numbers
clear way to distinguish someone who is actively looking for a job from someone who isn’t.
And this becomes a problem when a worker has been unemployed for so long that, though wanting a job, he doesn’t see the point in spending any more energy looking for one. This becomes a problem because when that worker stops looking for work, the government stops counting him as unemployed.
Following the Great Recession, American workers were out of work for historically unprecedented lengths of time. From 1950 to the Great Recession, the longest the average unemployed American had ever been unemployed was 21 weeks. By 2011, the average unemployment length had almost doubled to more than 40 weeks. The longer a person is unemployed, the greater is the chance that he will become discouraged and stop looking for work.
And during the Great Recession, a lot of Americans became discouraged. From January 2008 to January 2012, the fraction of the working-age population who were either employed or actively looking for work fell 1.8 percentage points. In other words, over those four years, 3.6 million working-age people had dropped out of the labor force.
The good news is that the fraction of working-age people in the labor force is steadily rising back to pre-recession levels, but the figure is still off by around half a percentage point. That doesn’t sound like much, but it equates to almost 1 million jobs. That’s an additional 1 million working-age Americans who, in pre-great Recession circumstances, would either be employed or actively looking for work. If we add those people back into the numbers, the unemployment rate is actually closer to 4.2 percent. That’s not bad, but it’s almost another year’s worth of job growth beyond what we have had so far.
Part of the reason it has taken a decade for the economy to recover from the Great Recession is that politicians have had too little respect for their ability to destroy jobs and too much faith in their ability to create them. Each new interference in job markets, from minimum wages to occupational licensing to higher business taxes to more burdensome regulations, though doubtlessly well-meant, is one more opportunity for politicians to make it harder for workers and entrepreneurs to create the jobs that make us all better off.