As Democrats celebrated the latest positive press release, published Friday, about the economy, a Republican senator played killjoy by taking a closer look at jobs numbers.
“It is good news that the unemployment rate has decreased to 5.6%,” Sen. Dan Coats (R-Ind.) said in the first of two tweets. “The bad news behind this statistic is that too many discouraged, working-age Americans are opting out of the job market,” he added.
Indeed, while the latest Bureau of Labor Statistics data show that unemployment fell by 0.2 percent between November and December, the labor force participation rate shrank by the same amount.
Unemployment is calculated by dividing the number of job seekers by the total labor force. If people without a job stop looking for employment, they are no longer considered part of the labor force. Thus, a drop in the unemployment rate can be driven by jobseekers giving up on finding work, as was the case in December: the employment increase last month of 111,000 was dwarfed by a labor force contraction of 273,000.
Despite the actual grim news behind December’s unemployment decline, the administration took the longview.
“FACT,” it said in a tweet from President Obama’s official Twitter account. “The annual average unemployment rate fell 1.2 percent between 2013 and 2014, the largest decline since 1984.”
And by that and one other measure, it certainly seems to have been an impressive year for the labor market: the economy added slightly less than 2.8 million jobs.
But that growth only barely outpaced the increase in population. The annual drop in unemployment–the biggest in three decades–was significantly pushed by discouraged workers. Between December 2013 and December 2014, the employment-to-population ratio only increased by 0.6 percent, to 59.2 percent.
The number suggests that the economy is weak by historical standards. The last two times that unemployment was 5.6 percent, in June 2008 and June 2004, the employment-to-population ratio was 62.4 percent–more than three percentage points above where it currently is.
