We know the unemployment rate dropped because workers left the labor force rather than because we created new jobs. But a lot of commentators — myself included — jumped to the conclusion that the workers who left the labor force did so because they were unable to find a job and so they gave up. A closer look at the data shows that's not true.
There are lots of reasons people leave the labor force other than being unable to find work. They retire. They go to school. They start a family. They get married. Here's how the numbers on workers not in the labor force for any reason have looked in recent years:
You can see the little jump at the end there. That's the most recent employment report, and it's why the unemployment rate went down.
The Bureau of Labor Statistics does not, as far as I know, keep very detailed statistics on most of these motivations. But they actually do check to see how many of the workers are out of the labor force because they're discouraged about being unable to find work. And that number actually fell by 8,000 people between July and August, reaching it's third-lowest point this year. Here's the graph:
So we don't know why more than 500,000 people left the labor force between July and August. But the numbers we have suggest that it wasn't because the number of discouraged workers rose.
That said, "discouraged worker" is a very specific thing. It means a worker who looked for a job recently and gave up because they couldn't find one. But we are seeing a lot of people who are out of the workforce and, though they've not necessarily been looking for a job, would still like to have one. Here's that graph:
So here's what we can say. We're not adding enough jobs. The labor force has been shrinking. And lots of people who want a job don't have one. But the number of actual "discouraged workers" is not rising, at least as far as we know.