The national unemployment rate fell to 5.9 percent in September as the percentage of Americans not in the workforce reached a 36-year high, according to a Friday report from the U.S. Labor Department.
“Total nonfarm payroll employment increased by 248,000 in September, and the unemployment rate declined to 5.9 percent,” the U.S. Bureau of Labor Statistics reported Friday. Employment increased in professional and business services, retail trade, government employment and health care, according to the labor report.
That’s the lowest national unemployment rate since July of 2008, but the report is not all good news.
The national workforce participation rate — a measure of how many Americans who can work are working — fell from 62.8 percent to 62.7 percent, reaching a 36 year low. In real numbers, that means a record 92.6 million Americans are not in the work force.
The workforce participation rate is particularly important to understanding unemployment trends because of how the Labor Department calculates the official unemployment rate. When an unemployed individual stops looking for work, the Labor Department no longer counts them as unemployed. The individual is still jobless, but, for a variety of reasons, has given up on his or her job search.
The “Discouraged Worker” factor is just one possible explanation for the falling labor force participation rate. It may also be a product of demographic trends (i.e. the retiring of baby boomers), as the Labor Department suggests, or cyclical, as some have argued.
The method the Labor Department uses to calculate unemployment means decreases in the official unemployment rate can’t be entirely attributed to increased employment. Indeed, a declining unemployment rate could be bad news if the decrease is primarily because of declining workforce participation, as many commentators have suggested.
Another dark spot in the jobs report centers on the underemployed. This category, also known as involuntary part-time workers, includes people who are working part-time jobs who would prefer to full-time employment. According to the Labor Department, 7.1 million Americans are considered underemployed.
Young and Jobless
Youth unemployment continues to soar, particularly among African-Americans. According to Generation Opportunity’s Millennial Jobs Report for September, trends in unemployment for individuals aged 18-29 are troubling. The effective (U-6) unemployment rate, which is adjusted for workforce participation, is 14.9 percent for millennials.
Unlike the nominal unemployment rate, the U-6 rate takes into consideration those who are no longer looking for a job. According to the report, the falling workforce participation rate has created an additional 1.955 million young people that the Labor Department does not count in the official (U-3) unemployment rate.
Young African-Americans and Hispanics are unemployed or falling out of the workforce at higher rates than the rest of the population, according to the report. The effective (U-6) unemployment rate is 22.3 percent for 18-29 year old African-Americans and 15.7 percent for their Hispanic peers.
“Washington is too busy intervening in the market, stifling innovation and entrepreneurship – our best opportunities to succeed,” said Patricia Lee, director of outreach for Generation Opportunity, a non-profit millennial advocacy organization.
“As a country, we must push for policies that put more young people on the pathway to success, not the fast track to joblessness,” she said.