We're all pleased that the unemployment rate has been low for quite a while now. But the unemployment rate does have a flaw. It does not include those who have stopped looking for a job. That's measured by the participation rate; it measures all active workers divided by the working-age population. The participation rate has been low since the onset of the Great Recession.
From about the late 1980s until 2008, the participation rate fluctuated around 66% to 67%. But after the Great Recession, the rate dropped more 3 percentage points over the next seven years and has barely budged since. The latest jobs report shows it’s at 62.8%.
The 3 percentage points decline in participation translates to over 6 million people no longer in the labor force. Should we worry?
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