August 01, 2014

Are Workforce Dropouts Returning to the Job Market?

For the first time in the last six years, the number of people who either have a job or are looking for one is increasing in most U.S. states. Many states experienced sharp declines in labor force participation after the 2007-2009 recession. Reports suggest that demand for labor appears to have grown to a point where many of the people, who had dropped out of the workforce, are restarting their job hunts.

Employment: Total Labor Force, Job Openings, and Hires

Employment: Total Labor Force, Job Openings, and Hires

Source: BLS

The June 2014 jobs report marked the fifth-consecutive month in which the American economy added over 200,000 new jobs. While unemployment remains above pre-crisis levels, long-term unemployment is falling fast from the historic highs it reached in 2009 and 2010. Currently, there are nearly 1.2 million fewer long-term unemployed (those who have not found work for at least 27 weeks) than there were last year. In June, 293,000 people left the long-term unemployment population.

long term

Some economists, including former White House advisor Alan Krueger, argue that while the unemployment rate has continued to decline, much of the drop is due to people giving up their job search, which means that they are no longer counted as unemployed. Some of this decline in labor participation is due to an aging workforce and the retirement of baby boomers, which may keep participation from ever reaching pre-recession levels. However, Federal Server Chair Janet Yellen says that millions of workforce dropouts and long-term unemployed are working in part-time jobs.

Research by both Goldman Sachs and the Federal Reserve indicates that the long-term unemployed are starting to find jobs, and are using part-time work as a stepping-stone to full-time employment. Part-time workers account for more than 18 percent of the total workforce.

Employment: Part- and Full-Time

employement part and full time

Source: BLS