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The unemployment rate and number of jobs added are often used as reference points for the state of the economy. But these numbers don't provide a clear picture of the country's economic outlook, according to journalist Heidi Moore. 

The real story, Moore says, is told by the labor force participation rate, which indicates how many Americans are dropping out of the workforce and how many are currently employed. The labor force participation rate has been falling since the recession began and is now at its lowest point since 1979. 

"The labor force participation rate is really a measure of potential that is lost: the intelligence and strength of Americans that goes idle because it cannot find a single profitable outlet," 

. She finds fault with Congress, which has done little to address the issue, she writes:

"Yes, senators and representatives may tour around and shake hands and make speeches, but in the job these congressmen and women are paid, in part, to do — create jobs and foster a functioning economy — they are taking the salary and accomplishing nothing at all. They turn their eyes and ears to the chatter and cafeteria gossip of the Washington fights over the 'sequester' and the fake crisis of long-term deficits, while a real, immediate disaster in their own constituencies has grown unchecked for five years."

Moore, the U.S. finance and economics editor for The Guardian, and labor economist Mark Price joined The Daily Circuit to discuss the country's shrinking labor force.

THE TAKEAWAY: Unemployment leads to more unemployment.

A caller in Wayzata said she'd been out of work since she was laid off four years ago from a corporate job with a six-figure income. "I have a master's degree," she said. "That overqualifies me for a call center."

Price said her story "makes perfect sense given what we know about the labor market ... what you've got is a situation where employers are able to be extremely picky about who they hire for any particular opening. And that creates situations where workers slip through the cracks, and find themselves in a situation where an employer can say, 'Ah, you have  a master's degree, you're overqualified for this job, I can find somebody else.'"

Moore said the caller illustrated another common point: "The longer you're unemployed, the more likely it is that you'll stay unemployed. A lot of employers have had an unfair bias against people who have a year or more of unemployment, and that really makes no sense. ... Presumably you could pick up some really great talent at less than market cost right now." 

"I saw something the other day:  Five percent of janitors in the country have master's degrees," she said. "A lot of bachelor's degrees as well. We're in survival mode in a lot of households across the country, where people are taking any job to get money and keep themselves occupied."

Discouraged job seekers behind shrinking labor force.

 "Falling participation, especially among young Americans, is troubling and could have long-lasting effects on the economy." (Reuters)

 Numbers from the Bureau of Labor Statistics.

The 37 Percent Mystery: Where Did All the Workers Go?

 "The big shifts of the last 20 years have been among the youngest and oldest adults. The group with the largest decline in participation has been teenage men. The group with the largest gains in participation have been 60-something women." (The Atlantic)

Fed May Have to Tolerate Inflation to Fix Labor Problem.

 The Wall Street Journal writes about a study that looks at what the Federal Reserve would have to do to reverse this trend.

Many People Have The Labor Force Participation Rate Story All Wrong.

 Business Insider looks at an argument from UBS that "this dropping participation rate is largely due to shifting American population dynamics. Specifically, we're running out of workers."

Gallery

Business and Economic News

The labor force participation rate has been falling since the recession began and is now at its lowest point since 1979. Who's dropping out of the workforce and what can be done to fix it?

Percentage of Americans in the workforce at lowest point since 1979

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