Employment Rate Remains Stagnant with Little Cause for Hope

AEI Online | Published on October 8, 2010

By Henry Olsen

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Today’s labor report confirms what Americans know: the economy is staggering and stagnant. With a loss of another 95,000 jobs last month and an unemployment rate unchanged at 9.6 percent, there is little evidence that things are getting better for our fellow citizens who are out of work. This glum picture is confirmed by a look at the little-known employment-population ratio.

In contrast to the better-known unemployment rate, which measures the percentage of adult Americans who are actively seeking jobs but do not have one, the civilian employment-population ratio could be called the employment rate, measuring the percentage of adult Americans who havea job.

This report, for the month of September, pegged the employment rate at 58.5 percent, the same as August’s. The rate remains at decades-long lows.

The employment rate is a better reflection of the bleak future facing American workers than the unemployment rate because the employment rate includes workers who are not counted as unemployed because they have left the workforce. According to today’s report, America’s adult population has risen by 2 million people since last September, yet only 623,000 of them found work. Despite this grim fact, the unemployment rate fell over the last year, from 9.8 to 9.6 percent, because the number of unemployed fell by 292,000. The number of Americans not in the labor force, including millions of Americans too discouraged to even look for work, rose over the past year by about 1.75 million people, nearly all of the increase in the adult population.

Those looking for a silver lining may point to the creation of 64,000 private sector jobs in September. But private sector jobs increased in August, too, and reported employment on the household survey increased each of the last two months as well. Neither rate of increase, though, does more than keep us level with the growing population.

In short, the employment rate counts the misery of those discouraged and forgotten Americans; the unemployment rate does not. Unfortunately, today’s report gives them little cause for hope.

Henry Olsen is a senior fellow at the Ethics and Public Policy Center.