Labor Force Participation Rate Holds Steady at 63.7 Percent

Job creation barely keeps up with population growth, unemployment rate at 8.3 percent

February 3, 2012

The new jobs report shows that the labor force participation rate remains near its lowest point in three decades, even as the total number of jobs slowly ticks upwards.

The labor force participation rate remained steady at 63.7 percent in January, lower than the 65.7 percent rate when President Obama took office in January 2009 and still close to a 30-year low.

The economy added 243,000 jobs in the month of January and the unemployment rate fell to 8.3 percent, the Bureau of Labor Statistics announced Friday. That is slightly 100,000 jobs more than the 140,000 necessary to keep pace with population growth.

The job numbers were above analyst’s expectations. The increase is the largest since April 2011. The unemployment rate is the lowest since February 2009.

The government also revised job numbers from November and December upward.

The unemployment numbers are sure to boost President Obama’s reelection message that the economy is on track for recovery. Yet problems remain.

Hamilton Place Strategies, a consulting firm, released a study Friday that concluded there are more than 3 million workers "who should be participating in the labor force but are not actively seeking work." If these missing workers entered the workforce, the unemployment rate would rise, since job growth has not been sufficient to meet the demand for jobs.

Research by economist John D. Mueller at the Ethics and Public Policy Center, a Washington, D.C., think tank, shows an inverse relationship between means-tested transfer payments such as unemployment insurance, and labor force participation. Economists have found that a similar inverse relationship exists between increases in the minimum wage and the entry into the workforce of low-skilled youth and minority labor.

The duration of unemployment insurance has reached unprecedented lengths, the number of families on nutrition and health assistance programs has exploded, and the minimum wage has increased during President Obama’s time in office.

Youth unemployment stood at 23.2 percent in January. The black unemployment rate fell to 13.6 percent.