Unemployment Rate Dips 0.1%, But Workforce Participation Rate Falls 0.2%

May 4, 2012 - 8:37 AM

The April jobs report showed employers added fewer workers than expected with nonfarm payrolls rising by only 115,000.  Economists had expected 168,000 jobs and the tepid April increase falls far short of the 250,000 jobs needed each month to maintain population increases.

Yes, the unemployment rate ticked down by 0.1% to 8.1%, - but, that number may be a little misleading.  The participation rate, defined by the Bureau of Labor Statistics (BLS) as the labor force as a percent of population, declined in April by 0.2 to 63.6% to the lowest level since 1981 - in other words, there were less Americans “participating” in the job market in April than in March.

In fact, the participation rate has been declining over the last year.  In April of 2011 the participation rate stood at 64.2%.  Today’s BLS report shows that the percent of Americans in the labor force has declined by 0.6% over the last year; the April rate reported at 63.6%.

So, with fewer Americans “participating” in the labor force, how does the unemployment rate keep ticking lower?  Well, BLS counts only those Americans looking for work as unemployed.  The number of Americans who dropped out of the labor force from March to April was 522,000.  These Americans are no longer considered unemployed and therefore are not part of the equation.

Let’s think about this simply: If you remove Americans from the workforce, even though they are still technically unemployed (and no longer earning money to spend in our economy), the unemployment rate decreases.

To use President Obama’s words: “It’s simple math.”

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