Jobs report: As fewer try to find work, unemployment rate drops to 8.1 percent

The unemployment rate moved downward another notch in April, to 8.1 percent, the Labor Department reported Friday, but the drop was hardly the good news it seemed to be.

The unemployment figure, which reflects the percentage of people looking for work, fell largely because people gave up trying to find jobs. People who quit seeking work are no longer counted as unemployed.

“The improvement in the unemployment rate we saw in April was entirely due to people dropping out of — or not entering — the labor force because of weak job prospects,” said Heidi Shierholz, a labor economist at the Economic Policy Institute.

Overall, the Friday jobs report added to concern that the economic recovery may be slowing.

The figures on job creation come a week after the Commerce Department reported that during the first three months of 2012, economic growth had slowed to an annual rate of 2.2 percent, after reaching 3 percent growth at the end of 2011.

The economy added 115,000 payroll jobs last month, a meager showing compared with earlier this year, when the jobs tally was rising at twice that rate and was sowing optimism about the nation’s economic prospects.

The ranks of the unemployed fell by 173,000 in April as workers gave up their job search. The labor force, defined as the number of people working or seeking work, fell by 342,000 in April, the Labor Department said.

The jobs figures are “generally telling you that discouragement is rising,” said Steven Ricchiuto, chief economist at Mizuho Securities.

Other economists say that while discouragement is a factor in the shrinking labor force, so is the aging of the baby-boom generation.

Since 2000, the percentage of Americans working or seeking work — the labor force participation rate — has been steadily declining as baby boomers have begun retiring. Because of this, the Federal Reserve Bank of Chicago expects the labor force participation rate to be lower in 2020 than it is today, regardless of how well the economy does.

In a March report titled “Dispelling an Urban Legend,” Dean Maki, an economist at Barclays Capital, found that demographics accounted for a majority of the drop in the participation rate since 2002.

To put that in perspective, economists project that if the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 11.1 percent. If the percentage was where it was when George W. Bush took office, the unemployment rate would be 13.1 percent.

The unemployment numbers, which may be the economic statistic bandied about the most in a presidential contest, were seized upon by presumptive Republican presidential nominee Mitt Romney, who called Friday’s report “terrible and very disappointing.”

Romney suggested that job growth in a recovery should be closer to 500,000 jobs a month.

“This is way, way, way off from what should happen in a normal recovery,” he said on Fox News. “It’s a terrible and very disappointing report this morning. . . . We seem to be slowing down, not speeding up. This is not progress.”

Yet an economy that is consistently adding 500,000 jobs a month has rarely been achieved in U.S. history, according to Labor Department figures. Over the past 20 years, there have been only two months — once in 1997 and again in 2010 — when the economy added non-farm payroll jobs at that rate.

The average annual monthly growth in those payroll jobs was less than 150,000 over the two decades before the recession.

President Obama touted the job gains in a speech on education loans to students at Washington-Lee High School in Arlington County.

“The unemployment rate ticked down again,” he said. “So after the worst economic crisis since the Great Depression, our businesses have now created more than 4.2 million new jobs over the last 26 months — more than 1 million jobs in the last six months alone. So that’s the good news. But there are still a lot of folks out of work, which means that we’ve got to do more.”

The president’s top economist, Alan Krueger, noted that unemployment has dropped a percentage point since August and said that nearly three-quarters of that drop is because of actual employment, not just the shrinking labor force.

But one statistic was stubbornly unimproved. The number of long-term unemployed, those who have been out of work for 27 weeks or more, was little changed at 5.1 million in April. That group makes up more than 40 percent of the jobless rolls.

Stock prices dropped with the news of the jobs report. The Dow Jones industrial average was down 168.32 points for the day, or 1.3 percent.

While the jobs numbers for April fell well short of what economists would like to see, several analysts suggested that, taking a broader view, the recovery seems healthy, if not strong.

Over the past four months, the number of non-farm payroll jobs has climbed 200,000 a month on average.

Economists attributed at least part of the slow job growth in April to the good weather in January and February; employers hired people then, boosting the numbers for January and February but leaving fewer jobs to fill in March and April.

“This isn’t a panic moment — the underlying trend is probably something more like the average of the last four months,” Shierholz said.

Still, she estimated that the economy would have to add jobs at a far faster rate — 350,000 per month — to return to normal employment levels in three years.

The lack of job creation means there are between 3 million and 4 million people who would be working or looking for work if their job prospects were better, she said.

“This is the lowest fraction of Americans seeking to work since 1981,” said Douglas Holtz-Eakin, president of the American Action Forum and the former director of the Congressional Budget Office. “It’s just hard to spin that as somehow desirable.”

Staff writers Philip Rucker, Amy Gardner, David Nakamura, Ed O’Keefe and Jenna Johnson contributed to this report.

Peter Whoriskey is a staff writer for The Washington Post handling investigations of financial and economic topics. You can email him at peter.whoriskey@washpost.com.
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