Pretty much every time I write about statewide trends in employment, questions arise about the labor force participation rate. So this post attempts to address some of those questions.
The Federal Reserve Bank of Atlanta has some great resources online that can be used in conjunction with the Jobs Calculator. If you click the tab that says “State By State,” you can select individual states and then click on the map for more information. If you keep clicking where possible, you’ll eventually see a graph of the labor force participation rate for Georgia (and for any other state) since 1981.
And you’ll see that the labor force participation rate in Georgia has fallen more quickly than the national average.
It’s important to note that the headline jobs numbers each month come from the survey of establishments with payrolls. The unemployment rate, labor force participation rate, and other labor market data come from the household survey. These two surveys produce different numbers that sometimes seem contradictory but show similar trends over time. From the Atlanta FRB FAQ:
The Establishment Survey estimates the number of jobs for which a paycheck was written in the United States during a particular pay period, whereas the Household Survey is a measure of individual employment status. For example, if one person holds two jobs, the Establishment Survey will count two jobs, but the Household Survey counts one person employed.
The difference arises mostly because the scope of the Household Survey is broader than the Establishment Survey. The Household Survey includes the self-employed, unpaid family workers, agricultural workers, and private household workers—all of these workers are excluded from the sample frame for the Payroll Survey.
The two employment numbers typically follow the same cyclical paths, although the gap has varied from time to time.
The participation rate is the labor force (which includes all employed persons and all unemployed persons who looked for work in the previous month) as a percent of the civilian noninstitutional population, which is comprised of “persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces,” according to the Bureau of Labor Statistics.
After rising for many years, in large part because of the entry of women into the labor force, the participation rate in the U.S. peaked in the late 1990s at more than 67 percent. At its peak, the participation rate among 25-54 year olds was over 84 percent. Check out this post at Calculated Risk for more info. (Even after recent declines, the labor force participation rate in Nov. 2013 among men with no disabilities aged 25-64 was 82 percent. Women with no disabilities between 25 and 64 had a participation rate of 70.1 percent in Nov. 2013.)
The nation’s labor force participation rate has been falling for over a decade, with an accelerated decline since the 2007-2009 recession.
Georgia’s labor force participation rate actually peaked at over 70 percent — several points higher than the nation as a whole. But Georgia’s participation rate has fallen even more quickly than the nation’s and was 62.4 percent in November 2013, compared to the Nov. 2013 national rate of 63 percent.
I had expected the labor force participation rate to level off or even increase as the economy improved, but that has not been happening. Look at the latest labor market data for Georgia. In November 2013, every single metro area in Georgia had a smaller labor force than in November 2012. Only one metro area — Atlanta — had more “employed persons,” as defined by the household survey, than a year earlier.
Two weeks ago, I wrote about the slow, stagnant, and even declining payroll employment in most of Georgia’s metro areas over the past year, but the household survey data are even worse.
So, as Georgia’s elected officials and economic development bureaucrats tout the decline in the state’s unemployment rate, we should keep in mind that the unemployment rate is primarily declining because more and more Georgians have left the labor force over the last year.