National unemployment rises to 7.6 percent in May

by Ted Dabrowski and John Klingner The Bureau of Labor Statistics announced today that the national unemployment rate rose in May to 7.6 percent from 7.5 percent one month earlier. Non-farm private payrolls rose by 175,000. The payroll growth, which has averaged 172,000 over the past 12 months, continues to be significantly below the range needed...

by Ted Dabrowski and John Klingner

The Bureau of Labor Statistics announced today that the national unemployment rate rose in May to 7.6 percent from 7.5 percent one month earlier. Non-farm private payrolls rose by 175,000.

The payroll growth, which has averaged 172,000 over the past 12 months, continues to be significantly below the range needed to bring the US employment back to pre-crisis levels. In May 2007, the unemployment rate was 4.4 percent.

The lack of robust job creation, more broadly captured by the U-6 unemployment rate that includes both those unemployed and underemployed, dropped to 13.8 percent from 13.9 percent one month ago. Nearly 12 million Americans remain unemployed and more than 21 million remain unemployed or underemployed.

And while the unemployment rate has trended lower over the past year, the actual numbers belie what is truly responsible for the drop – a significant increase in the number of people dropping out of the labor force.

The labor force participation rate, or the percentage of the population that is an active part of the labor force, has been declining steadily for years. This has occurred as more and more people have given up searching for jobs.

The participation rate currently stands at 63.4 percent, a drop of 2.6 percentage points from the pre-recession peak of 66 percent in January 2007. This means 6.3 million Americans have dropped out of the work force since then.

To put this in perspective, if those 6.3 million people were to reenter the labor force in search of work, the actual unemployment rate in May would skyrocket to 11.1 percent.

The slow improvement in the unemployment rate does not change the fact that the nation is still experiencing a lackluster recovery.

With the unemployment artificially buoyed with so many Americans having left the labor force, the downturn will not be over for many Americans until the nation sees actual robust job growth driven by real market reforms.