I’ve got a longer piece on job market indicators going up later on the NYT blog, but for now, here’s a factoid that I thought deserved a look.
To my mind, one of the most important labor market questions right now is whether the labor force participation rate will start climbing back out of its recessionary hole. That matters a lot for both the living standards of the majority who depend on work and paychecks as opposed to asset portfolios, and for the macroeconomy as well, since labor force growth is a key input to GDP growth.
It was thus good to see a little pop in the labor force participation rate in last Friday’s jobs report, and while a one-month result from the noisy household survey doesn’t mean much, the participation rate is up 40 basis points off of its December trough.
Here is an interesting and related trend. It’s from the labor force flows data which tracks people’s monthly movements in and out of employment, unemployment, and not in-the-labor-force (or NILF; remember, if you’re looking for work, you’re unemployed; if you give up the search, you’re NILF). This line shows that the share of the population moving from unemployment to NILF, and is thus a driver of the decline in the labor force.
It’s clearly a cyclical variable, as you’d expect, and it shot up in the great recession, as discouraged job seekers left the labor force. But while it is still elevated, its decline is quite sharp, a signal that fewer unemployed are giving up and leaving the labor force and a positive sign for possibly restoring some labor force growth.