Undercounting very discouraged workers

Here is a guest post from Stephen Bronars.  Excerpt:

I estimate that there are over four million fewer labor force participants than what would have occurred if age-adjusted participation rates maintained their pre-recession trend.  In this recovery, the official BLS count of “marginally attached” workers underestimates, by 40%, the number of people who left the labor force because they stopped looking for work.  Although BLS figures suggest that marginally attached workers are a minority of the 5.6 million adults who left the labor force, a more plausible estimate is that 72% of these non-participants stopped searching for work in the past few years.

If official underutilization measures included jobless workers who gave up searching for work within the past 36 months the labor force underutilization rates reported by the BLS would be higher by about 0.9%.  For example, the underutilization measure that includes unemployed and marginally attached workers would have been 10.2% (rather than 9.3%) last month.


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