Nationally, the unemployment rate is 3.6%. That’s healthy. That’s pre-Covid healthy. Then why does the economy feel so different now than it did then?
There are a lot of reasons, including supply chain issues across the board, and historic inflation across the country. What doesn’t get much attention though is the labor participation rate.
This is that “unaccounted for” number within the unemployment rate. These are people who are no longer looking for employment.
The labor participation rate stays within a remarkably narrow range. According to the St. Louis Fed, it’s been dropping since it’s peak participation in 2000, at 67%, leveling off at about 62% in 2014. (It rose slightly throughout Trump’s presidency to 63%). And that’s where it was in February of 2020, before the spaghetti hit the combine.
But here’s what’s remarkable: in the midst of it all, the labor participation rate only dropped to 60% at its lowest point.
We’ve been recovering since then, but only back to 62%, erasing all the Trump-era gains. Now 1% may not sound like much, but when you’re talking about a full percentage of people not returning to work, and apparently not even looking for work, that has a big effect on the economy.
So far, the Fed has blamed this on “issues with child care and elder care, in-person schools being closed, concerns about getting sick and extra unemployment benefits.” Especially among the prime work force years of 25-54.
But a new study by researchers at the Federal Reserve Bank of Atlanta, the University of Pennsylvania and Universitat Autonoma de Barcelona suggests a much more devastating reason for the decline.
The site substance abuse as a major underlying reason why people have stopped looking for work. “Between 9% and 26% of the decline in prime-age labor-force participation between February 2020 and June 2021 was due to "increased substance abuse,” according to Zero Hedge and Bloomberg’s reporting on the subject.
The study stated: “Once started, drug and alcohol abuse is difficult to stop for many people...an increase in substance abuse during the pandemic would mean lower labor-force participation rates even after the pandemic has ended.”
There are other cultural issues at play here, too. Consider in 1964, the labor participation rate was only 58%. Throughout the 1960s-1990s, that number consistently rose due to women joining the workforce in greater numbers. But why it has continued to decline since then is a long-term question that needs to be answered. And short term, the increase in drug and alcohol dependency is a not-so-kind reminder of the costs of shutdowns.
Ryan Wiggins is the author of the extremely serious and not funny robot novel, The Life of Human, and is a writer and producer of television shows. He is the host of Wiggins America on 97.1 FM Talk in St. Louis.