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Mystery in lower jobless rate: Why are adults dropping out of work force?

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nemployedThe US unemployment rate fell significantly in December, but the big reason for the shift isn’t necessarily a comforting one for the economy.

The jobless rate dropped to 6.7 percent of the work force, the lowest level since October 2008. But the shift came only partly because unemployed people were finding work. Rather, the main driver of the change was people who exited the labor force by ceasing to look for work.

And this wasn’t a one-month anomaly. Rather, the trend of people opting out of the labor force has become a post-recession norm.

“To me, the most troubling jobs data is not the unemployment number but rather the disheartening decline in the percentage of Americans working or seeking a job,” economist Jerry Jasinowski, a former president of the National Association of Manufacturers, wrote in November. “In 2007, that number stood at 66 percent. Today it is 62.8 percent, the lowest since 1978.”

Since then, the problem has persisted. The so-called “participation rate,” the share of working-age people who have a job or want one, edged up in November and then back down in December as the labor force shrank by 347,000.

That shrinkage was central to the decline in the unemployment rate, because people are only counted as jobless if they are participating in the labor force by actively seeking work.


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