No Longer Seeking Work

The unemployment rate is dropping, but for what reason? It is not because individuals are getting jobs, it is because they have stopped looking for jobs! In a recent newspaper article, Wire Reports announced that many individuals are no longer seeking work. This creates an economic problem, causing the labor participation rate to fall to its lowest level since August 1978.

From 2008 to 2013, the labor force participation rate has dropped from 66% to 63.2%. The labor force participation rate is the percentage of working-age people in an economy who are employed, or unemployed but looking for a job. Typically, working-aged people are people between the ages of 16-64. People in those age groups who are not counted as participating in the labor force are typically students, homemakers, and people under the age of 64 who are retired. 

The unemployment rate doubled from 5% to 10% between 2008 and 2009, and now, in 2013, it has fallen back down to 7.3%. The unemployment rate has fallen because more than 300,000 people stopped looking for work. The unemployment rate is the number in the civilian labor force divided by the number unemployed. However, everyone without a job isn't necessarily unemployed, at least according to the Bureau of Labor Statistics. To be counted in the unemployment rate, you not only have to be without a job, you have to have actively looked for work in the past four weeks. If someone has given up looking for work, they are no longer counted in the unemployment rate. When the unemployment rate reaches 6-7%, as it did in 2008, the government gets concerned, and tries to create jobs through stimulating the economy. It may also extend unemployment benefits to prevent the recession from deepening. Studies show that extended unemployment benefits are the best way to boost the economy. 

How exactly does creating jobs help the economy? Isn't it sort of a backwards approach to create jobs? If all jobs are occupied, then we would have sufficient resources to sustain society/economy and we would have excess people who wouldn't need jobs. If more people are looking for work, less people will be buying, and the retail sector will decline. If less people are looking for work, then that means jobs are being left undone. More jobs means more people having money, meaning more people buying things which goes back to the community and keeps businesses going. People need jobs in order to get a steady income. The employee will use that income to pay for products and services in order to enjoy life. 

Source: "On close look, job numbers not rosy" by Wire Reports, from Dallas Morning News, 9/7/13