U.S. Unemployment Stats: Fantasy vs. Reality

The December 2013 Bureau of Labor Statistics (BLS) Unemployment Report showed that only 74,000 people found new jobs. Of these, 31,000 were part-time. Yet, the U.S. unemployment rate fell from 7 to 6.7 percent. You ask, how can this happen?

The answer lies in the fact that about 500,000 Americans quit looking for a job. They removed themselves from the BLS unemployment rate calculations.

What is going on? The U.S. stock market has been booming. Interest rates remain very low. Federal Reserve economists and Wall Street pundits keep telling us that the recession is over. If you don’t have a job, however, this seems pure fantasy. The share of the U.S. population available to work is now at a 35 year low – a 62.8 percent labor participation rate. This is the same rate as in 1978. It includes all people who are not infirm, in the military, or locked up somewhere. These workers are either employed or still seeking a job today.

At the same time those workers not in the labor force, or who have given up looking, rose in December 2013 by 525,000 persons to 91.8 million! If this increase had been zero, the U.S. unemployment rate would have remained unchanged at 7 percent! Those BLS numbers don’t lie, they just distort reality.

There are those economists and pundits who claim that the swelling number of Americans who have dropped out of the labor force is due to the massive number of baby boomer retirements and more young people going to school. These claims lack credible proof.

A comparison of BLS labor participation rates from 1999 to 2013 for different age ranges shows a dramatic workplace shift is underway. There has been a major decline in workers under 45, while there has been a significant increase in the percent of people over 60 who are at work.

U.S. workers aged 30 to 59, the prime age group for employment, comprise 50 percent of the potential workforce. They account for most of the decline in the U.S. labor pool since 2007 and 75 percent of the decline for 2013. If you zero in on workers aged 45 to 54, their labor participation rate is 79.2 percent, the lowest since 1988! “It just keeps dropping and dropping,” states Julia Coronado, chief U.S. economist at BNP Paribas. “It’s depressing, as it’s not just older workers retiring.”

At the end of 2007, when the recession began, 66 percent of Americans were at work. To return to that level in 2014, 8 million Americans would have to be added to the workforce. If this occurred, the current U.S. unemployment rate would rise to 11.2 percent!

All of the above suggests that the pool of potential U.S. workers is substantially higher than the BLS unemployment rate indicates. What is keeping these workers on the sidelines?  It’s clear to me: A growing labor mismatch between vacant jobs and the skills of unemployed American workers. It’s a structural unemployment problem has existed for the past decade, and it is now becoming more critical.

An Accenture 2013 Skills and Employment Trends Survey of 400 U.S. executives found that 46 percent are concerned that they will not be able to find workers with the needed skills. A 2014 McKinsey survey of business and education providers in the European Union found that about a third reported difficulties finding workers with the right skills.

Clearly the U.S. education to employment pipeline is broken. There are approximately 7.2 million vacant jobs in the United States that currently can’t be filled. My latest published research on the skills-jobs mismatch, Future Jobs: Solving the Employment and Skills Crisis (Praeger, 2013), estimates that the lack of workers with appropriate skills for a 21st-century workforce in the United States, and in nations worldwide, could result in 14 to 25 million vacant U.S. jobs by 2020. Future Jobs, however, does point to reform efforts underway in regions of the United States, as well as overseas, that have the potential to substantially alter this dire scenario, if they are rapidly brought to scale.

The realities of this skills-jobs collapse will trigger a major economic crisis for many Americans. As the pain increases, we can expect a rising public demand for meaningful action by business and government at the regional and state levels to fix the jobs and skills disconnect, instead of the current fantasy that the U.S. unemployment problem is ameliorating.


Edward E. Gordon is an internationally recognized researcher, author, speaker, and consultant on the future of America’s and the world’s workforces. His previous books include: Winning the Global Talent Showdown, The 2010 Meltdown: Solving the Employment and Skills Crisis, Skill Wars, and FutureWork. Ed can be contacted at 760.346.6364 or imperialcorp@juno.com.


Ira S Wolfe