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Where Have All the Workers Gone?

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The latest jobs report from the Bureau of Labor Statistics showed a net gain of 204,000 in October, including 19,000 more jobs in manufacturing, but a slight bump up in the overall unemployment rate from 7.2 to 7.3 percent. The report was generally greeted with a shrug by economists and pundits - yet another middling employment report, good but not good enough.

But to me, the most troubling jobs data is not the unemployment number but rather the disheartening decline in the percentage of Americans working or seeking a job. In 2007, that number stood at 66 percent. Today it is 62.8 percent, the lowest since 1978. Total employment today is about 3.5 million less than it was in 2007, and many of those who are working are losing ground. Median household income in 2012 was essentially flat, reflecting millions of people who have given up looking for work.

To get our economy back on a solid growth track depends on getting more people working, preferably at good jobs. Working people are reliable consumers who are the primary engine of our economy. Well paid workers who are optimistic about the future are more likely to make major purchases of cars and houses - critical elements of economic growth. But good jobs with good wages are increasingly hard to find.

There are several reasons the work force is declining. An obvious one is the aging of the baby boom generation. Though many people continue working well beyond retirement age, often because of economic necessity, that age cohort is much less likely to be working than younger people. Most people take retirement when they can, and a growing number - some 8.8 million --are seeking are drawing disability benefits. Some of this is no doubt fraudulent, but in many depressed parts of the country people are desperate for any source of income.

But the aging boomers are only part of the story. The work force participation rate for workers between the ages of 16 and 54 fell dramatically during the Great Recession, and has not recovered. The Urban Institute says this is mainly because fewer workers are entering the workforce in the first place. Women in particular are less likely to enter the work force than they were a few years ago, opting to pursue more education or raise their children.

And of course, there is the culprit of low skill manufacturing jobs that have gone away never to return. I am well aware that manufacturers are begging for more qualified job applicants, but the emphasis there is on advanced skills that most unemployed lack.

In sum the declining labor force participation rate is a datum that should worry us more than the unemployment rate. It is yet another compelling argument- as if we needed one- for sensible immigration reform. We also need to rethink how to make better use of the growing cohort of retirees and we need greater emphasis on skill training for jobs in advanced manufacturing. In short, we need to be more creative about how we use our labor force.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. November 2013