Workforce Participation at 36-Year Low as Jobs Climb

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Photographer: Daniel Acker/Bloomberg

Applicants look over a posted list of individuals chosen for one-on-one interviews during a flight attendant recruitment event in Chicago.

Even the strongest job growth in two years isn’t enough to entice more people into the labor force, one of the biggest conundrums of the U.S. economic expansion.

The share of the working-age population either employed or seeking a job declined in April for the first time this year, helping drive the unemployment rate down to 6.3 percent, the lowest since September 2008. At 62.8 percent, the so-called participation rate matches the lowest since March 1978.

A shrinking workforce saps the U.S. of the manpower needed to boost the expansion to a higher level, keeping the world’s largest economy merely plodding along. It also undercuts the theory that sustained growth alone will be enough to attract more Americans, from students to people discouraged over employment prospects, back into the hunt for jobs.

“It doesn’t seem like the improving job market is really pulling people back into job-seeking,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It is kind of a sobering message about the supply side of the economy and the economy’s potential growth rate.”

The decline in participation from 63.2 percent in March came as fewer Americans entered the work force, while the number of people who have given up the search for employment remained close to the average for the last year. There were 783,000 of these so-called discouraged workers in April, compared with 835,000 a year earlier.

Fewer Entering

The number of people coming into the workforce -- by either landing a job or starting a search for work -- plunged to 5.84 million in April, the fewest since November 2008, according to figures from the Labor Department. The 14 percent decrease from the prior month’s 6.79 million was the biggest since 1995.

Those leaving the labor force, which include retirees, people who choose to take care of family members and those pessimistic about finding employment, totaled 6.66 million, little changed from the 6.42 million averaged over the prior 12 months.

“It wasn’t so much that more people left, it was that a lot fewer than average entered,” Karen Kosanovich, an economist at the Bureau of Labor Statistics, said in an interview. The government surveys the same people for several months in a row to determine flows in the workforce, she said. The figures showed it was a broad-based decline in participation not limited to one age group or sex, she said.

A late Easter this year, combined with an early survey week, may have contributed to last month’s plunge in participation. Easter Sunday fell on April 20, compared with March 31 in 2013, which would have delayed the entry of seasonal workers into the labor force.

Household Survey

At the same time, the Labor Department surveys households about family member employment status for the week that includes the 12th of the month. That means last month the period under review, which spans Sunday to Saturday, began on April 6 and ended April 12, the earliest possible time frame.

Such a confluence means the survey probably missed capturing the arrival of prospective seasonal workers later in the month.

“The people we traditionally expect to see flowing into the workforce this time of year have not entered,” Labor Secretary Thomas Perez, said in an interview. The participation rate has been “bouncing around” and is little changed over the past six months, he said, and it’s still something that bears watching carefully.

The decrease in the labor force last month also probably didn’t reflect the retirement of more baby boomers. The participation rate among those 65 years old and older rose to 18.9 percent in April from 18.5 percent the prior month.

Coming Out

In addition to fewer people flowing into the workforce, the number flowing out is being nudged higher. Unemployed workers leaving the workforce last month totaled 2.55 million in April, the most since October.

That may reflect the expiration of long-term jobless benefits. Federal funding for emergency unemployment insurance payments, which had been part of stimulus packages since the financial crisis in mid-2008, expired at the end of the year after being left out of a bipartisan budget deal. Without the incentive of emergency benefits to keep them looking for work, many of these unemployed people probably gave up and dropped out of the labor force. A smaller number of job seekers produces a lower unemployment rate.

“It looks like you had a big increase in the people who went from unemployed to not in the labor force, which is kind of what you’d expect if the end of extended employment benefits caused people to ease out of the job market,” said JPMorgan’s Feroli. The longer the decline in participation persists, “the more we have to give credence to the idea that this is something that’s structural.”

To contact the reporter on this story: Victoria Stilwell in Washington at vstilwell1@bloomberg.net

To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net Mark Rohner

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