Since spring lockdowns were lifted, the demand for workers has snapped back faster than many economists expected. Between April and October the unemployment rate fell by more than half, to 6.9%, undoing more than two-thirds of its initial rise.
But unemployment data overstates the health of the labor market because the supply of people either working or looking for a job has declined. The U.S. labor force is 2.2% smaller than in February, a loss of 3.7 million workers.
The labor-force participation rate, or the share of Americans 16 years and over working or seeking work, was 61.7% in October, down from 63.4% in February. Though up from April’s trough, that is near its lowest since the 1970s, when far fewer women were in the workforce.
The supply of workers and their productivity are the building blocks of economic growth. A smaller labor force leaves fewer workers to build machines and clean tables, restraining the economy’s long-term prospects.
“If we don’t get all the workers back, we can never have a V-shaped recovery,” said Betsey Stevenson, economics professor at the University of Michigan, referring to a quick and sustained bounce-back after a sharp decline. “Everybody should be worried about making sure that we don’t leave workers behind,” she said.