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On Labor Day: More Americans Are Working but the Labor Force Is Shrinking



As Americans observe Labor Day, and the latest numbers released by the US government show disappointing job growth, the US labor market faces several major problems:

First, although private employment has been increasing, it remains below what it was at the outset of the Great Recession.

Total private employment has increased by 1.7 million (or 1.6 percent) since August 2009, but it remains 6.2 million (or 5.8 percent) below its August 2007 level. Compared to recoveries following the previous 5 recessions, total employment had increased by between 6 million to 7 million (or approximately 7 percent) 2 years after the end of the 1973–75 and 1981–82. The current recovery is clearly the weakest one in recent history.

Second, in contrast to past recoveries, federal, state, and local government employment is declining, serving to exacerbate rather than ameliorate problems in the labor market.

Total private employment increased by 1.7 million (or 1.6 percent), but government employment fell by 450,000 (or 2 percent) over the past year. Approximately half of the decline in government employment has resulted from layoffs of state and local teachers.

Third, although more Americans are working, fewer Americans are available, able, and seeking employment this Labor Day than last year. The United States is experiencing its first decline in its labor force since 1956!

Long periods of unemployment are causing people to stop looking for work and drop out of the labor market or not enter the labor market at all. Although the working age population increased by 1.8 million (or 0.7 percent) between August 2010 and August 2011 and by 3.8 million (or 1.6 percent) between August 2009 and August 2011, the size of the labor force declined by 523,000 (or 0.3 percent) over the last year and 768,000 (or 0.5 percent) over the last 2 years. The number of people who no longer consider themselves attached to the labor force increased by 2.3 million (or 2.7 percent) over the last year and by 4.5 million (or 5.6 percent) over the last 2 years.

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