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Saturday, December 3, 2016

Missing Workers: The Missing Part of the Unemployment Story [feedly]

Missing Workers: The Missing Part of the Unemployment Story
// Economic Policy Institute

Updated December 2, 2016

In a complex economy, conventional measures sometimes fall short.

In today's labor market, the unemployment rate drastically understates the weakness of job opportunities. This is due to the existence of a large pool of "missing workers"–potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger. Because jobless workers are only counted as unemployed if they are actively seeking work, these "missing workers" are not reflected in the unemployment rate.

As part of its ongoing effort to create the metrics needed to assess how well the economy is working for America's broad middle class, EPI tracks "missing worker" estimates, updated on this page on the first Friday of every month immediately after the Bureau of Labor Statistics releases its jobs numbers. The "missing worker" estimates provide policymakers with a key gauge of the health of the labor market.

Current "missing worker" estimates at a glance

Updated December 2, 2016, based on most current data available

Total missing workers, November 2016: 2,320,000Unemployment rate if missing workers were looking for work: 6.0%Official unemployment rate: 4.6%

Chart: Total number of missing workersChart: Unemployment rate if missing workers were looking for workChart: Missing workers by age and genderMethodology

Missing Workers

Missing Workers

Missing Workers


How do we estimate the number of missing workers?

First, we estimated trends in age- and gender-specific labor force participation rates between 1986 and 1996 as well as 1996 and 2006. We then took a weighted average of the age/gender specific labor force participation trends in those two periods and projected they would continue through 2016. We weighted the earlier period by a fifth and the latter period by four-fifths. Because the years we chose (1989, 1996, and 2004) had near-identical overall unemployment rates, we think this largely purges the age/specific participation trends of any cyclical impact. Given this, we assume that these projected participation rates capture the structural, long-run trends of these groups.

Any shortfall between these projections and the actual labor force participation rate is thus a good measure of the cyclical impact on the labor force participation rate, i.e., the change that is a direct result of the weak labor market in the Great Recession and its aftermath. These shortfalls do not count, for example, those retiring baby boomers who would have left the labor force whether or not the Great Recession happened.

Based on this logic, missing workers are estimated in the following way: The labor force participation rate projections for 2016 by gender and age group (age groups 16-19, 20-24, 25-34, 35-44, 45-54, 55-64, 65-74, 75+) that we constructed based on earlier trends as described above are assumed to be structural rates. The current month's structural rates (by gender and age group) are calculated by linearly interpolating between 2006 and 2016. The size of the potential labor force is calculated by multiplying the current month's structural rates by actual population numbers (available by gender and age group from the Current Population Survey public data series). The difference between the size of the potential labor force and size of the actual labor force (also available by gender and age group from the Current Population Survey public data series) is the number of missing workers.


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