p>The Bureau of Labor Statistics released its latest numbers –
the unemployment rate fell a whopping one-tenth of a percentage point, from 8.2 in March to 8.1 in April. While some
(particularly people who are running for re-election) may see this as a
promising path to a rate that falls well below 8 percent by fall, there is more to the story, as always.
As I mentioned in a previous blog post, this does rate only counts people who are actively looking for work. It does not include those who have become discouraged and given up, or those who are prefer a full-time job but are working part-time. Add in these folks and the rate remains stubbornly high at 14.5 percent. Also, a smaller percent of the working-age population is actually working. The labor force participation rate is now at 63.6 percent, the lowest it has been since December 1981. (See figure below)
An even less talked about statistic is labor productivity, as measured by output per hour. Overall output increased 2.7 percent, but hours worked increased even more at 3.1 percent. This is in stark contrast to the trend from the first quarter 2011 to first quarter 2012, where output increased more than hours worked. What is so important about labor producitivity? A more productive workforce means higher wages. But if labor productivity trends downward, this, combined with a slack labor market, will put downward pressure on wages. Recovery will be an uphill climb.