The Amazing Shrinking Labor Force

http://www.economicpopulist.org/content/amazing-shrinking-labor-force

Tue, 10/13/2009 - 14:05
About a week ago, Econompic posted some nice charts about recent shrinkage in the labor force. As they noted, without labor force shrinkage, the unemployment situation would look a lot more dire, rising above 10% for the nation as a whole.

In the period between March and August of this year, 837,200 persons left the labor force. This has had the ironic effect of driving down the unemployment rate in many states. Basically, unemployment is still up, but not up as much as it would be if people hadn't exited the labor force. The "economic recovery" at hand is thus largely a function of people who have lost all hope and stopped even looking for work.

This phenomenon has not been equally distributed across the country. This is to say that while some states have seen virtually no change in their labor force others have seen their labor forces shrink considerably. I've created a graphic to show this, which I've posted below.

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All this has significant implications for unemployment. Remember that these numbers represent people who have at one point either had a job, or were looking for one, and have given up. If we hold the labor force steady from March of this year and count those who have exited the labor force among the unemployed, the rate in many states skyrockets.