The seventh observation is a little discussed statistic buried within the Bureau of Labor Statistics' website. The statistic is the labor participation rate as a percentage of the population (age 16 and older). This statistic by nature will never equal 100% because several groups of people are not in the labor force. The groups are teenagers (16 to 18 years old), discouraged workers, retired workers, prisoners, committed patients, students who do not work, and soldiers. Illegal immigrants who work may not be reflected in the participation rate because the Census Bureau counted them in the population, but the Bureau of Labor Statistics did not count them in the labor force. In Figure 3, the labor participation rate is graphed between 1947 and 2011. The U.S. recessions were drawn manually onto Figure 3 as pink boxes, and a recession always lowered the labor participation rate. The 2007 Great Recession was particularly gruesome. The labor participation rate fell to 58.4% in 2011 from a peak of 64.4% in 2000. (The Year 2000 was an exceptional year). Roughly, 14.2 million people left the labor force. (The last paragraph indicated 8.7 million workers dropped out of the labor force; government statistics when viewed from different angles usually yields different results!) The real question is where did these people go? Are they discourage workers who gave up the pursuit of a job? Did more people retire? Did more people enter college without working, or the states incarcerate more prisoners?
One important assumption was made in this blog; the assumption is the Bureau of Labor Statistics is not manipulating the numbers. Although U.S. bureaucracies are not political in nature, the top leaders of the bureaucracies are chosen by the President with confirmation of the Senate. Moreover, a bureaucracy's funding depends on the President and Congress. The President and Congressmen want to be re-elected, and they may put pressure on the bureaucracies to release positive statistics. Consequently, bureaucrats have an incentive to skew the statistics, making it appear the economy is improving especially before an election. The 2012 presidential election is around the corner, and the news is reporting optimistic unemployment statistics, indicating a possible economic recovery. However, if one reads the comments at the end of those rosy unemployment stories, the readers' opinions express disbelief in those numbers. Unfortunately, this blog cannot uncover fraudulent government statistics. Nevertheless, the U.S. government's statistics do indicate the following:
- The 2007 Great Recession was one of the worse recessions to hit the U.S. economy since the Great Depression.
- Employers are using more part-time labor and fewer full-time labor. The 2007 Great Recession was particularly harsh on workers with full-time jobs.
- A large number of workers left the labor force. The million-dollar question is why did these workers go? Did millions of workers become discourage and give up their search for a job? Are more workers retiring? If more Americans are retiring, why are the younger workers not filling these vacancies?