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The Job Market Is Pulling In People Who Didn’t Want To Work Before

This is In Real Terms, a column analyzing the week in economic news. Comments? Criticisms? Ideas for future columns? Email me or drop a note in the comments.


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When last month’s jobs report showed a surge in labor-force participation, a lot of reporters — including me — wrote that Americans were finally returning to the labor force. That was true, but the full story is a bit more complicated. The people joining or rejoining the labor force aren’t necessarily the groups that have struggled most in the economy in recent decades — which might help explain why so many Americans remain anxious about the state of the economy despite persistent evidence that it is improving.

Some quick background: During the recession and its aftermath, millions of Americans left the labor force, meaning they were neither working nor actively looking for work. Some of the exodus was due to the aging population and other long-term forces, but a big chunk of it was due to the terrible economy: People couldn’t find jobs, so they quit looking. Ever since, economists have wondered whether and when those people would return. In recent months, there have been signs that they are: The participation rate, the share of the adult population that is in the labor force, has risen three months in a row and is at its highest level in more than a year. (We’ll get updated numbers April 1.)

But “return” isn’t really the right word. It makes it sound as though there have been millions of people sitting around on their couches for the past eight years waiting for the economy to turn around. But most of the people who left the labor force during the recession have found other ways to get by, relying on a spouse or family member’s income, retiring earlier than planned or working off the books. And although many might be eager to return to the conventional labor force, others have moved on: A 60-year-old who lost his job in the recession probably isn’t going to come rushing back to work now just because the unemployment rate has fallen.

In other words, the people entering the labor force today aren’t necessarily the same people who left it during the recession. For one thing, the new entrants tend to be young: The biggest increase in the participation rate over the past three months has been among those under 25. Many are just finishing school and entering the labor force for the first time. (Young people always make up a large share of new labor force entrants, almost by definition. But their rising participation rate suggests that some young people are joining the labor force who might have stayed out a couple of years ago.)

Data from the Current Population Survey helps fill out the story. The survey interviews people in consecutive months, so it’s possible to track people who are out of the labor force one month and either working or looking for work the next. The numbers reveal that most of the new entrants didn’t want a job when they were out of the labor force. When they did enter the labor force, it was as “employed” rather than “unemployed” — they didn’t start a job search; they found a job. Many workers in those new jobs are part time, but that’s by choice; relatively few of the new entrants report wanting full-time work.

Taken together, the data suggests that the people entering the labor force aren’t “discouraged workers” who gave up looking for work and are now returning. Rather, the improving job market is pulling people off the sidelines and into the labor force.1 They might be stay-at-home parents who decide to go back to work, students who take on a part-time job or early retirees who decided to supplement their retirement income.

All of that is good for the economy. In one particularly encouraging sign, the recent rise in participation has been concentrated among those without a college degree, a group that has particularly struggled in recent years. That suggests the tightening job market is leading employers to consider candidates they might otherwise have rejected.

But one group that hasn’t made much progress: older, less-educated Americans, especially men. That group has seen a long-term decline in employment that stretches back well before the recession, and it has made little gain recently. It is also, of course, a group that has seemed to dominate the political debate in recent months because of the economic anxiety that has contributed to the rise of both Donald Trump and Bernie Sanders. The improving job market seems to be opening up opportunities for millions of Americans — but not, so far, for them.

The end of the boom

Last week, I noted that the end of the oil-drilling boom hasn’t led to a spike in unemployment in North Dakota. But that doesn’t mean the state isn’t seeing other effects. New data this week showed that tax revenues in North Dakota were down a whopping 35 percent at the end of 2015 compared with a year earlier. Most of that decline was due to a 50 percent drop in revenue from taxes directly on oil production (so-called severance taxes). But the drilling slowdown, and the economic slump that came with it, also took a broader toll. Income tax revenue fell about 10 percent; sales tax revenue fell 15 percent; and corporate income tax revenue fell 146 percent — as in, it was negative.

North Dakota wasn’t the only energy producer seeing revenues plummet. Oklahoma, Louisiana and Wyoming all saw double-digit percentage declines in tax receipts. (Texas saw a more modest 5 percent decline.) Then there’s Alaska, which has seen its tax revenue fall 41 percent over the past year. But as I wrote back in November, Alaska is a special case.

Number of the week

In 2015, the unemployment rate among veterans ages 25 to 34 — the prime age for Americans who served in Iraq and Afghanistan — was 6.9 percent, a full point and a half higher than for non-veterans in the same age range.

Those numbers come from a new report from the Bureau of Labor Statistics, which found that overall, recent veterans — those who have served on active duty since 9/11 — had an unemployment rate of 5.8 percent in 2015, compared with 5.2 percent for non-veterans. As a group, recent veterans are younger and less educated than non-veterans, which explains much of the disparity. (That wasn’t the case when I ran a similar analysis in 2014 and found that recent veterans had a higher unemployment rate even controlling for age and education.) Still, the unemployment rate doesn’t fully capture the challenges facing recent veterans: A third of them report having a service-connected disability and, not surprisingly, significantly fewer of those veterans are working.

Elsewhere

In recent years, multiple states have passed laws that prohibit employers from considering job applicants’ credit histories. Jeff Guo reports on new research that finds such laws might actually increase racial discrimination in hiring.

Eliot Brown reports on the Twin Cities’ incredible (and economically dubious) stadium-building boom. They have five and are planning a sixth.

Stefanie Johnson and David Hekman describe their new research that finds that women and minority executives are penalized when they promote workplace diversity.

Emily Badger explains why young people aren’t buying a first home: “Starter homes” have gotten prohibitively expensive in many cities.

El Centro, California, has lost 60 percent of its manufacturing jobs over the past decade, the Bureau of Labor Statistics reports in an interactive map.

Footnotes

  1. These categories aren’t mutually exclusive. For example, someone who lost a job in the recession might have been “discouraged” for a while but eventually decided that staying home with the kids was a good option. ^

Ben Casselman is FiveThirtyEight’s chief economics writer.

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