Where Did All the Workers Go?

The labor force is shrinking, and it will keep on shrinking for years to come.

By + More

The disappointing economic recovery has brought an unusual amount of attention to an obscure statistic buried in the monthly jobs data: the labor force participation rate.

It's why econ wonks have been shuddering even as the unemployment rate ticks downward. The unemployment rate only counts jobless people in the labor force—that is, people who don't have a job but have been looking for one. That means that if people drop out of the labor force, it can bring down the jobless rate even when job creation is lackluster. In the late 1990s and early 2000s, over 67 percent of Americans were working or looking for work. Now, the figure is 63.3 percent.

[ALSO: What's Hot and What's Not in Dissecting Jobs Numbers]

The fear is that people want work but, unable to find jobs, are giving up altogether. That's true, but it's not the full story. Last month, there were 803,000 discouraged workers—people who wanted a job but had given up. That's more than twice as high as the monthly average from 2000 to 2008, but it's also down significantly from 2010, when the figure was above 1.1 million for nearly the entire year.

The recession accelerated the trend, but American workers have been quietly exiting the labor force since participation peaked in the late 1990s.

The reasons are as much due to demographics as economics. Below, a list of the groups of people who have left the labor force. The categories overlap, but together they help to explain why the labor force is shrinking and why it won't grow again for decades—and why that's not necessarily a bad thing.

Construction Workers (not to mention public servants, real estate agents, reporters, and factory workers)

The recession pulled people from most industries out of the labor force, but a few were particularly hard-hit. The Labor Department counts displaced workers every two years, and in its most recent survey found that in the 2009 to 2011 period, 16.4 percent of construction workers who had lost jobs due to layoffs and cutbacks were not in the labor force, up nearly threefold from 6.5 percent in 2005-2007. Of course, that's only one industry of many that have suffered. The shares of former workers from government, finance, and the information industry—which takes in newspaper writers, publishers, and broadcasters—who are not in the labor force also have grown considerably.

[SEE: The 10 Highest-Paid Jobs in America]

That has made for some astoundingly high figures in some cases: more than one-quarter of former workers from both the auto and machinery manufacturing and real estate sectors were out of the labor force in the 2009 to 2011 period.

Youngsters

Young workers have fallen out of the labor force at an alarming rate, with their participation rate down nearly 12 percentage points since 2000, to 54.5 percent. The teenagers have it worse: the rate for 16-to-19-year-olds has fallen 18 percentage points since 2000. Below, the plummeting participation rate for 16 to 24-year-olds:

(Source: Bureau of Labor Statistics)

In part, this is because of a tanking economy. Young workers are particularly susceptible to downturns, as they tend to be the least skilled and least educated workers, and are vulnerable to layoffs.

Still, it's also about young would-be workers spending more time in the classroom and in school-related activities, says one expert.

"It's the long-term increase in school enrollment," says Mitra Toossi, a Labor Department economist who studies labor force dynamics. "Teens attending summer schools, high school, college, ... it has increased a lot. And that's a kind of structural change that has been happening for the last 10 to 15 years."

[SEE: The 10 Lowest-Paid Jobs in America]

Some of this increase in education could be considered a form of discouragement (and an expensive one at that)—think of the refrain, "The job market stinks. Might as well go back to school."—but it's also a trend that could eventually yield more value to the American workplace.

Mystery Workers

The government counts a group of people imprecisely titled, "Not in Labor Force, Searched For Work and Available, Reasons Other Than Discouragement." This nebulous population is almost twice the size of the number of discouraged workers right now. It also has climbed dramatically in recent years: