This is definitely a trend worth watching. A slow job market is gradually discouraging people from even seeking work.
This trend is troubling in itself, but also creates confusion about how to measure the actual conditions of the job market. To count as “unemployed” in government surveys, you have to be actively looking for a job—so people who stop looking for work don’t count as unemployed. This means that if workers abandon their job searches because there’s no work to be found, the official unemployment rate can be flat or even improving even as the actual employment picture gets worse. Conversely, if people start to look for work because they recognize that there are jobs to be had, the unemployment rate can rise even as jobs are becoming more plentiful.
These factors can make the official unemployment rate a particualrly slippery statistic to work with, especially over the short term.
Another common way of gauging employment is by dividing the total number of people with jobs by the total working-age population. When employment is strong, that measure tends to rise. Right now, however, this number is at its lowest point in 16 years—even though the official unemployment rate isn’t particularly high.
But employment-to-population ratio also has its flaws. First, the farther we get from the 2000 census, the more likely that our population estimates are out of whack with reality—which could make that figure even less reliable than the unemployment rate.
And second, there are lots of reasons that people stop working: in an ideal world, parents who stay home with their kids, young people delaying work to improve their education, early retirees, and people who simply don’t feel they need to work all the time shouldn’t be seen as a dead weight in the economy.
This points to a common problem with all measurement of social conditions: the quality of a yardstick, and its ability to give you meaningful information, changes with the social and economic landscape. The trick is to know when to abandon your yardstick.
Update: Looks like there’s some good employment news for the month – perhaps we’ll see a slight uptick in the employment-to-population ratio.