Prosperity Watch Issue 37, No. 2: North Carolina's unemployment rate with missing workers remains high

The reality of North Carolina’s labor market is far less rosy than the recent drop in the state’s unemployment rate suggests. Five years after the end of the Great Recession, there are still too few jobs for those who want to work, and the result is that the state, like the nation, is experiencing a growth in the number of workers missing from the labor market.

The missing workers measure is a new indicator that can paint a much sharper picture of just how the economy is faring by estimating the number of North Carolinians who would have been seeking work if the Great Recession hadn’t taken place and job opportunities remained strong.  The added value of this measure is that it captures these missing workers that the official unemployment rate does not.

In April 2014, North Carolina’s missing workers equaled an estimated 242,164 and their ranks have grown by 45 percent over the past year. The state’s unemployment rate of 6.2 percent would be nearly double (11.4 percent) if these missing workers were counted.

Missing workers are largely the result of the lack of jobs, rather than demographic trends.  First, each newly employed person in a given month is nearly twice as likely to have been classified as “not in the labor force” in the previous month than classified as “unemployed.”  This suggests that many of those who have left the labor force—and thus are not counted for official statistics—would work if there were jobs available.  Second, numerous researchers have found that demographic trends—such as the retirement of baby boomers or the greater college attendance rates of young people—explain a very small amount of the broader trends in labor force participation.  In fact in November 2007 projections of the U.S. workforce by the Bureau of Labor Statistics which took into account the anticipated increase in retirements and higher college attendance still predicted much higher labor force participation through 2016 than we’ve actually seen so far.  This points to the reality that the lack of jobs is driving the high numbers of missing workers from the labor market.

When jobless workers get discouraged about finding work and leave the labor force, it indicates that the economy is in worse shape than the unemployment rate would suggest, and is a bad portent for the economy overall.  Workers who are unemployed for long stretches see their skills erode, find it difficult getting hired for new work due to gaps in their employment history, and suffer both financial and health changes. It can also impact their children, who may fall into poverty.  For the economy as a whole to be productive, it is critical that the labor force grows alongside the growth in population and that those able to work remain in the workforce.

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