Normally, a drop in the nation’s unemployment rate would be reason to cheer. But August’s decline to 8.1 percent from 8.3 percent the month before prompted more hand-wringing than clapping.
Why? Because with the U.S. economy adding fewer than 100,000 jobs, the unemployment rate fell because of an increase in people leaving the labor force.
Not everyone who exits the labor force wants a job; some are new retirees, and others have gone back to school. But clearly more people have become so discouraged that they have stopped looking for work.
Bureau of Labor Statistics data show that roughly 8 percent of Americans who are not in the labor force say they would like to work. This figure has been rising since 2008, though it still is roughly 2 percentage points lower than in the mid-1990s. But that comparison provides little comfort, because other data show labor-force participation is at its lowest level in more than 30 years.
Persistent high unemployment could be the No. 1 issue from now until Election Day in November. It also has been a topic of much debate among economists, some of whom believe it is explained more by structural changes than a lack of demand by consumers.
But in a new research paper, Edward Lazear of Stanford University and James Spletzer of the U.S. Census Bureau reach the opposite conclusion: "Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment."
The patterns they found in employment data were consistent with those in prior recessions but more pronounced due to the severity of the downturn.
This question is not merely academic. As the two researchers note, "central banks may be able to reduce unemployment that is cyclic in nature, but not that which is structural." The Federal Reserve apparently holds the same view. At midweek, it reportedly was set to roll out another round of economic stimulus.
In the coming weeks, President Barack Obama and Republican nominee Mitt Romney will square off in debates likely to be dominated by questions about the economy. Expect the same in the area’s congressional races.
Voters will want to know where the candidates stand on actions to reduce joblessness. They deserve clear answers.
9/7/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.