What Recruiters Should Know About 102 Million Americans
The unemployment rate is holding at a seven-year low of 5.1%. After peaking at 10% in the wake of the financial crisis, the federal unemployment figure suggests that labor market conditions have improved in recent years. But for anyone who needs to understand and make use of the U.S. workforce, these figures are misleading.
The reality is that only 59.2% of Americans are employed–and this number has hardly changed compared to a year ago. The current labor force participation rate, which adds up those who are either employed or actively looking for work, is only slightly higher at 62.4%. So while the 5.1% unemployment figure suggests there are only 7.9 million people in the U.S. without a job, the truth is that over 102 million people ages 16 and over are not working.
That figure includes the 7.9 million people classified as unemployed, but also the 94 million Americans who are not considered to be in the labor force at all. With so many employment data points being tossed around it would be easy for recruiters to simply accept the narrative of a growing, stronger workforce in the post-recession era. But when real data suggests nearly a third of working-age Americans aren’t employed, it’s clear that recruiters need a better understanding of the labor force and how we measure it.
First, What Unemployment Figures Really Mean
So how exactly do we calculate these numbers every month? According to the U.S. Labor Department the unemployment rate is, “the ratio of unemployed to the civilian labor force expressed as a percent.” This figure counts only the people who don’t have a job and are actively looking for one. “Actively looking for work” does not take passive job seekers into account and only considers these methods of job searching:
- An employer directly or having a job interview
- A public or private employment agency
- Friends or relatives
- A school or university employment center
- Submitting resumes or filling out applications
- Placing or answering job advertisements
- Checking union or professional registers
- Some other means of active job search
This means the unemployment rate does not include anyone who is not employed and not actively looking for work by these standards.
(Plus, none of these calculations take prison labor into account, despite the fact that most of the 2.2 million Americans behind bars are of working age. Mandatory in-house employment and convict-leasing partnerships with for-profit businesses provide workers for agriculture, manufacturing, mining, and garment making.)
The point recruiters should take away from unemployment is that it’s not the most clear-cut or useful figure. Hiring decisions based on the overall labor market need to take into account more than the latest unemployment rate. We cannot assume all of those 94 million Americans not counted in the labor force don’t want to work. A thorough understanding of the entire U.S. workforce, and trends in labor force participation, is crucial for HR leaders today.
Who Is and Isn’t in the Labor Market
If we already know that just 59.2% of Americans have a job, it makes sense to examine the labor force participation rate in addition to the unemployment rate. The Labor Department’s Bureau of Labor Statistics (BLS) calculates labor force participation as the share of the working age population that is actually in the labor force–employed or actively seeking employment. This can be broken into two categories:
- Employed – anyone over 16 who was paid to do work during the measured time period.
- Unemployed – anyone over 16 who had no employment, was available to work and made specific efforts to find employment, or was waiting to be recalled to a job from which they had been laid off.
Based on these two groups, the U.S. labor force participation rate is currently 62.4%. But if the labor force only counts all employed and technically unemployed people, what about those 94 million Americans? They represent every person over the age of 16 who does not officially participate in the labor market, and they can be categorized as:
- In school or training programs
- Taking care of family (e.g. stay at home moms, primary caregivers)
- Disabled or too ill to work
- Want a job but not looking for work by BLS standards
Some of these groups make sense, such as Baby Boomers reaching retirement, and young adults still in high school or college. The same goes for many family caregivers and disabled or sick adults. They are unlikely to be working full time, and many will not even hold part time jobs. But the fact that these groups combined make up almost one third of the U.S. population, and that the labor force participation rate has continued to decline since the beginning of the Great Recession, means recruiters should take a closer look at these categories.
What Demographic Shifts Mean for Employers
Since 1999, the number of people not in the labor force due to retirement, education or training, and disability has increased, as has the number of people who want a job but don’t have one. And the total number of people in the labor force has been falling among all age groups. 41 million retirees aside, how have the other categories of non-labor force adults changed?
Perhaps most important to recruiters is the issue of education. The recession and weak employment led some people of all ages to pursue further education instead of jobs, ideally making themselves more attractive to employers. Assuming most students pursue qualifications that are in demand, this can eventually become a positive outcome for the labor market as students finish and join the workforce. However, there is already evidence suggesting the goals and expectations of students are not in alignment with employers’.
Those students represent approximately 15 million of the 94 million Americans not counted in the labor force, and should be taken into account alongside the 7.9 million unemployed workers. While they may not be applying to jobs yet, recruiters would benefit from monitoring their educational progress, anticipating changes to the talent pool in the near future.
And what about the millions of adults who are sick or disabled, who care for family members, or who are not actively seeking work for various reasons? Just how many really should be excluded from labor force figures? While we can’t accurately estimate the number of adults in these categories who might wish to join the labor force to some degree, the increasing preference for part time work and alternative working arrangements suggest this is another untapped source of talent for recruiters who are willing to think outside the realm of traditional employment numbers.
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