While perusing the WSJ this morning, I came across an article that stated that the unemployment rate is now down to 5.1%. Unfortunately, the labor participation rate now sits at 62.4%. When President Obama took office, that number was 65.7%. If we adjust today’s numbers using a 65.7% labor participation rate, we get an unemployment rate of 9.9%.
How so?
Let me illustrate with some numbers;
To arrive at these numbers I simply took the difference in the labor participation rate and added them to the unemployed. At 9.9%, that’s nearly twice the 5.1% reported unemployment rate.
To be fair, the labor participation rate does fluctuate. Here is the history of the rate since 1948 (from the BLS):
It peaked in the 90s, but has fallen off the cliff in recent years.
Some of the drop could be due to people retiring, but certainly not all.
