CHICAGO, Dec. 10 (Xinhua) -- The recent drop in the U.S. unemployment rate is partly due to an increase of people exiting the American labor force, a trend economist said when evaluating the long-term economic outlook.
Last week's release from the U.S. Bureau of Labor Statistics (BLS) reported that the U.S. unemployment rate in November had decreased from 9 percent to 8.6 percent, its lowest level since March 2009.
For many the improvement was marked as a new bright spot in an uncertain global economy, but it was also achieved with the caveat that 315,000 people had exited the labor force altogether.
Winner of the 2010 Nobel Prize in Economics for his work researching unemployment and markets with search frictions, Northwestern Professor Dale Mortensen explained to Xinhua how the new unemployment figure held a somewhat mixed message for the American economy.
"On the one hand job creation is improving; on the other, it's still very difficult to get a job so participation is falling, and the combination of those two led to the reduction in the unemployment rate this time," Mortensen said in an exclusive interview with Xinhua.
Though the net increase in job creation was relatively small, it was still important, he said.
"But nevertheless there's been a trend down in participation -- in particular, every month there's been a flow of workers who are discouraged, and that continues," Mortensen said, explaining that in response to the difficult job market some workers had given up trying to find work entirely.
Mortensen regretted that unfortunately little statistical information was available about those now departing the labor force, or the younger people who were delaying entering it.
However, he mentioned that their alternate activities could vary greatly, from enrolling in higher education to simply staying at home waiting out the bad job market.
It still remains unclear just how long these newly departed workers will have to wait for a full recovery, but the November BLS report shows that more are apparently choosing to do so, the employment participation rate falling from 64.5 percent last November to 64 percent this year.
It was also noted that employment participation rate of men over 16 had decreased from a seasonally adjusted 70.9 percent in November 2010 to 70.5 percent this year.
Additionally, the November unemployment rate for workers over 25 and without a college degree was twice that of those who held at least a bachelor's degree.
Taken in combination, it is the unemployment and gradual departure of unskilled male workers from the American labor force that most concern Erik Hurst, professor of economics as the University of Chicago.
According to Hurst, there has been a decrease in the labor force participation rate of unskilled American men since the early 1980s, something Hurst believes is directly related to the gradual decline of the U.S. manufacturing industry that has typically employed them.
For the past few decades, the U.S. manufacturing employment has been shrinking, and according to the U.S. Industrial Production-Manufacturing Index released in November by the Federal Reserve Bank, the manufacturing that remains is still 20 percent below 2007 levels.
"What normally happens when manufacturing declines is low skilled workers have exited the labor force, so part of the reason we've seen the labor force participation rate in men falling has been the decline in demand," Hurst said while presenting his 2012 economic outlook for the Booth School of Business, explaining that low skilled workers were choosing to stay at home instead of working.
For Hurst, this structural change in the workforce deserves special attention, as he believes the trend had previously been overlooked in the 2000s due to the effects of the American housing bubble.
Hurst said that the skill base for manufacturing and construction jobs was relatively substitutable, and that about 50 percent of all unskilled male workers belong to one of the two fields.
As the construction industry boomed, it then drew in the low skilled workers that had been left behind by manufacturing, in effect masking the structural labor problem with a housing demand that ultimately proved unsustainable.
"This recession is, I think, a little bit different from other recessions in the sense that we're not just deviating from trend... we absorbed workers into sectors that normally they wouldn't have been absorbed into absent of the construction boom," Hurst said.
The long-term economic outlook, he concluded, therefore needs to take these structural labor participation issues into account before the U.S. economy can recognize its full potential.
According to the BLS report the private sector added 140,000 jobs in November, but a remaining 13.3 million people are currently unemployed.
However, the Department of Labor also reported Thursday that the number of people filing for unemployment benefits had fallen to a seasonally adjusted 381,000 for the week ending Dec. 3, the lowest level in nine months.