President Reagan was quoted as saying that if the game Trivial Pursuit were designed by economists, the game would have 100 questions and 3,000 answers. President Reagan’s quip is the title of a Tidbits feature. This feature highlights a question or comment from a reader along with a response. Send questions or comments to email@example.com.
Question: How is it that the U.S. unemployment rate is at historical lows when there are 8 million working-age people not in the work force who are unemployed?
Response: In order to respond, a few definitions are needed. The Bureau of Labor Statistics (BLS) defines the unemployment rate as the number of unemployed people as a percentage of the labor force. The labor force is the sum of the employed and unemployed people. Unemployed people are those who are jobless, actively seeking work, and available to take a job. People who have not looked for work during the four weeks prior to an employment survey are not consider unemployed. So, the unemployment rate measures the share of workers in the labor force who do not have a job and are actively looking for one.
The BLS reported the U.S. unemployment rate was 3.5 percent in December and the number of unemployed persons was 5.7 million. Nebraska’s unemployment rate in November was 2.5 percent and the number of unemployed Nebraskans was 26,000 (Figure 4) . The BLS also reported the number of persons not in the labor force who currently want a job fell to 5.2 million. These people were not counted as unemployed because they were not actively looking for work during the four weeks preceding the survey or were unavailable to take a job.
Thus, the answer to the question is mostly definitional. Even though the number of people not working numbers in the millions, only a portion of them are considered unemployed because the others didn’t actively seek work in the four weeks prior to the survey. Nor are these people considered part of the labor force.
This begs the question, though, as to why many Americans are not actively seeking employment particularly since the number of job openings outnumber unemployed persons 1.7 to 1. Several reasons have been offered. People who were laid off during COVID have chosen not to return to work due to stress, lack of flexibility, or health concerns. Parents are not joining the workforce due to the lack of daycare. People have chosen to go into business for themselves. The Economist reports that according to the BLS nearly 1 million more Americans are self-employed than at the start of 2020. And people have decided to retire early or simply decided to not work. Whatever the reason, it’s an interesting time in labor markets with more people choosing not to seek employment despite the large number of job openings.
Figure 4. Persons Unemployed in Nebraska
Source: U.S. Bureau of Labor Statistics