Participation Rate is the New Unemployment Rate
Over the last decade, the unemployment rate has gotten a lot of attention. In October of 2009, the US had an unemployment rate of 10.0%. The overall economy was in the pits, many companies had to make excruciating decisions between layoffs, closures and wage cuts. That was the recession.
Reports coming out of BLS.gov (Bureau of Labor Statistics), look much brighter, with a 5.0% unemployment rate for September 2015. Right? Well, kind of… The unemployment rate is becoming less important because it only tells one part of a complicated story.
What economists and site selectors are looking at more and more is the Labor Force Participation Rate. Simply put, the Labor Force Participation Rate is the percentage of the adult population (aged 16 and over) that is currently employed. In comparison, the Unemployment Rate is the percentage of the adult population (aged 16 and over) claiming unemployment benefits.
A high unemployment rate may suggest recent and significant layoffs—which is often very attractive to a company looking for workers. A high unemployment rate may also suggest an area in decline—the employable population has left for greener pastures.
On the flip side, a low unemployment rate may signal to a company that the labor pool is flooded and wages will be competitive for in-demand workers. Also, a low unemployment rate may mean that the community has “aged out” and the labor pool is no longer looking for jobs.
These are just a few of the reasons to look at participation rates combined with demographic stats, rather than unemployment rates. A high participation rate in a given community provides evidence of a labor pool that is comparatively young, loyal, and productive—that the local labor pool is reasonably stable.
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