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, due to weak job opportunities, are neither employed nor actively seeking a job. 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.
“Determining the real number of missing workers has enormous policy implications, as policymakers base their policy recommendations on their assessment of the strength of the job market,” said EPI Economist Heidi Shierholz. “If they underestimate the number of missing workers, they will overstate the strength of the labor market, and be less likely to provide the economy with the support it needs.”
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 is introducing its “missing worker” estimates, which will be updated on the first Friday of every month immediately after the Bureau of Labor Statistics releases its jobs numbers. The “missing workers” estimate provides policymakers with a key gauge of the health of the labor market.
“Our estimate shows there are currently nearly 5 million missing workers—workers who would be either working or looking for work if the labor market were strong,” said Shierholz. “If these nearly 5 million missing workers had been actively seeking work in August, the unemployment rate would have been a staggering 10.1 percent instead of 7.3 percent, which demonstrates the continued magnitude of our jobs crisis.”
In the following blog post, Shierholz explains the methodology behind the estimate.
More than four years since the Great Recession officially ended in June 2009, the unemployment rate stands at 7.3 percent. This is still a percentage point above the highest unemployment rate of the early 2000s downturn, 6.3 percent. However, 7.3 percent is a big improvement from the high of 10.0 percent in the fall of 2009. Unfortunately, most of that improvement was for all the wrong reasons.
In today’s labor market, the unemployment rate drastically understates the weakness of job opportunities. This is because in the weak labor market of the aftermath of the Great Recession, there are a huge number of “missing workers”—potential workers who are neither employed nor actively seeking work simply because job opportunities remain so scarce. 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 is introducing its “missing workers” estimate. Our estimate shows there are currently nearly 5 million missing workers. These are workers who would be in the labor force if job opportunities were significantly expanded but, given the state of the labor market, are sidelined.
Exactly how many missing workers macroeconomic policymakers believe there are has enormous implications for their assessment of the strength of the job market, and therefore for their policy decisions. For example, if they underestimate the number of missing workers, they will overstate the strength of the labor market, and be less likely to provide the economy with the support it needs. As shown in the figure below, if the nearly 5 million missing workers were looking for work and thus counted as unemployed, the unemployment rate in August would have been 10.1 percent instead of 7.3 percent.
