Unemployment Rate vs. Labor Force Participation Rate
Hi Cullen-long time reader, first time commenter,
Yesterday listening to Janet Yellen testify before Congress, there were a couple of Congressmen (Republicans) who were grilling JY over the progress the economy has made since her time in office. She often cited how the unemployment rate is at a very low 4.8% as key factor in the strength in the economy and as a factor that Americans are generally doing better than they were 8 years ago. The Republican congressman would argue back that the overall economy isn’t that great, based on the fact that the Labor Force Participation Rate (LFPR) is at a very low 62.9% – implying that people actually aren’t looking for jobs anymore, things are not that great, and that the low unemployment rate is misleading. When she would argue that this is because of the aging baby boomer population, they would respond with a stat that percent of people working over the age of 65 is at an all-time high, while people ages 25-64 working was decreasing. I believe this was measure in terms of the overall labor force. This does in fact appear to be correct as well.
Wanted to hear your take on these two statistics and how it correlates with the actual number of Americans working. What would you view as a more accurate figure or “better stat”, to indicate the overall strength of the economy?
It seems as though the majority of economists go off of the unemployment rate, and that the LFPR is just a stat Republicans now use to show that Obama didn’t actually help the economy all that much. That being said it seems as though the LFPR isn’t a terrible indicator either when you look into it and see that isn’t jiving with the unemployment rate and that there are a lot of older people still working, although this may be more of an indicator that they just can’t afford to retire.
I’ll hang up and listen…
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