By Kenneth Hunter
NOTE: The following represents the analysis-based opinion of the author and do not reflect those of his employer or any other affiliations
Last August, I wrote up a post for the ASPA Blog that looked at North Carolina’s published unemployment rate and critically-compared it to how it would look if labor participation was kept constant, rather than fluctuated on a monthly basis. As the graph below from that report showed, unemployment rates would be significantly higher if participation was locked-in at a long-term, pre-recession average for the State (72.5%).
This week, the impressive news site Business Insider featured a similar graph that compared “published” national unemployment with an alternative rate, utilizing a constant national labor participation rate (67%). In light of the substantial decline in labor participation incorporated into January 2011 unemployment statistics reported by the BLS last week, the graph below is a pretty telling indicator of how uncertain we are when it comes to the health of the market and the overall economy.
Graph developed by Albert Edwards of Societe Generale
The 67% participation rate reflects labor involvement in 2000, as well as its long-term average prior to the recession. From a comparative perspective, labor force participation in the early-1960’s was a little over 50%, reflecting societal and workplace norms and practices of the time.
While we do not know if a constant participation rate will be incorporated into long-term changes to the calculating and reporting of critical statistics, the alternative look does provide us with a chance to seriously evaluate and consider what is “real” when it comes to the state of our national, state and local economies.