The national unemployment rate remained unchanged at 6.7 percent in March with 10.5 million people unemployed, according to today’s report. Among major worker groups, the unemployment rate increased 0.2 percentage points to 6.6 percent for women and increased 0.4 points to 12.4 percent for African Americans, but decreased 0.2 percent to 7.9 percent for Latinos.
To make sense of the falling national unemployment rate, down 3.3 percentage points since the labor market’s recession peak, it is important also to look at the labor-force participation rate—the share of the civilian population that is either working or actively seeking work—which is a key factor in calculating the unemployment rate. The civilian force participation rate ticked up 0.2 percentage points over the previous month to 63.2 percent in March. But this is a sharp overall decrease in participation from 66 percent in December 2007, at the economy’s peak prior to the Great Recession. This decline in labor-force participation represents almost 7 million people who are no longer working or looking for work.
The significance of this shrinking workforce depends a lot on its causes. A number of analysts, including Federal Reserve Bank of St. Louis President James Bullard, argue that declining participation is a result of aging demographics—an increase in the amount of people near or over retirement age who are choosing to exit the labor force. In this case, the measured decline in labor-force participation supports the notion that a declining unemployment rate reflects substantial improvement in labor-market conditions.
However, data provided in today’s report contradict this hypothesis. In fact, while the overall U.S. labor participation rate declined and then failed to recover from the recession, workers ages 55 and over actually increased their labor-force participation by nearly 1 percentage point, and participation for traditional working-age people has slipped substantially. Workers ages 25 to 54 saw labor-force participation fall 1.9 percentage points since the start of the Great Recession, while participation for young workers, ages 20 to 24, fell 2.4 percentage points.
Even though some would like the American people to think it is clear that the U.S. labor market continues on a path to recovery, a return to full employment—when wage increases are typically seen widely across the job market—remains far from the business-as-usual pace seen in recent months’ jobs data.