The Sad State of Missouri’s Labor Force Participation

Like the Transformers, there is more to the standard unemployment rate than meets the eye. You might have heard that the national unemployment rate fell to 5.9 percent in September. On the surface, this is good news. However, the unemployment rate is determined by dividing two numbers. The first is the number of people unemployed (those out of work and actively seeking it). The second number is the labor force (the number of those working plus the number of those who are not working, but are actively seeking work). At AEI, James Pethokoukis explains how a smaller labor force can affect the unemployment rate.

According to data collected by The Liberty Foundation, Missouri’s Labor Force Participation Rate (labor force divided by population) has declined since 1999. The foundation’s figures also offer breakdowns by gender and race.

This means that a lot of the drop in Missouri’s unemployment rate can be explained by the increasing number of people who have given up looking for a job. The two charts below show this phenomenon.

I wanted to see what the unemployment rate would be in 2013 if these discouraged people continued looking for work at the same rate they did in 2008. According to my calculations, Missouri’s annual unemployment rate in 2013 would be 12.5 percent instead of the officially listed rate of 6.5 percent. That’s a big difference. If anybody out there is touting how well Missouri is recovering, show them this number. It might give them a moment of pause.

It’s been stated before: Missouri is not doing well economically. Since the recession ended, the Show-Me State has had trouble recovering. This decline in the labor force masks just how bad things have been from an employment standpoint. If Missouri is to get back on track, a lot needs to be done.