Labor force participation steps into jobless rate’s spotlight


TRI-CITIES, Tenn. – Move over unemployment rate. There’s a new job metric in town.

The labor force participation rate (LFPR) is elbowing out some of the attention typically devoted to the government’s headline unemployment rate. It’s getting local attention because  unemployment rates are at historic lows, but we have a labor shortage, and only about half the people in the labor force are participating.

The headline jobless rate – aka U3 unemployment rate – is not a very good labor market metric. In fact, it’s only half of the story. The other half is the Bureau of Labor Statistics (BLS) jobs report. The jobs report surveys about a third of the nation’s companies. The unemployment rate is based on a sample of 66,000 households. Put the two together and apply some critical thinking, and you can get a pretty good handle on the market’s doing. But the unemployment rate gets most of the media – and public – attention.

Here are some of the often-overlooked weaknesses of the headline jobless rate.

  • It doesn’t count the folks who have looked for jobs, but not during the four weeks that the unemployment survey report is taken.
  • It doesn’t distinguish between full- and part-time workers. A part-timer who may have worked only a couple of hours a week counts as much as a full-timer.
  • It doesn’t consider skilled workers who can’t find jobs in their field who have accepted low-paying jobs.
  • It doesn’t capture the long-term unemployment rate. That’s someone who hasn’t worked for at least 27 weeks.

There is another BLS unemployment metric that does a better job. But the U6 report is a national-only count. The U3 report embraces cities of 25,000 and up. An average of 25 years of the difference between the US monthly U6 rate and the local U3 rate suggests a more accurate picture of the latest Tri-Cities unemployment is closer to 6% than the official 3.1%.

Labor force participation is gaining attention because it describes how many people in the overall labor force participate. It’s also linked to productivity. So, when labor force participation goes down, so does productivity – unless there’s technology that balances the two. If productivity goes down, so does the overall economy. And that’s especially worrisome in rural areas like the Tri-Cities and its communities which are attracting more retirees than young workers.

Since the pandemic, the number of local full-time workers aged 20 to 64 has declined by 17,215 people. The number of part-timers has increased by 21,846. The number who didn’t work in the past 12 months increased by 8,282.

Here’s an example of how the current U3 rates and the LFPR look for Tri-Cities counties. The labor force participation rate is listed first.

Carter, 50.5% – 3.2%.

Greene, 47.9% – 4.2%

Hawkins, 47.5% – 3.4%

Johnson, 55.7% – 2.9%

Sullivan, 50.7%- 3.1%

Unicoi, 47% – 3.9%

Washington, 56.3% – 2.9%

Tennessee, 58.5% – 3.5%

US, 62% – 3.5%


The reasons for the declining participation are varied and a lot more complex than the often lamented “people just don’t want to work anymore.” Actually, that trope has been around for a long time. It shows up in media comments going back over a hundred years.

One of the primary drivers is demographics. Workers are aging out of the labor force at a rapid rate. Companies are also using buyouts to get higher-paid, older workers off the books to bolster the company’s bottom line. And there’s an ageism barrier for older workers trying to find a job.

Currently, about 30 Tri-Cities residents a day celebrate their 65th birthday. And many began tapping their Social Security retirement benefits early when they turned 62. But older workers are not the only issue. We are attracting new residents to the area, but many – in not most cases  – they are retirees.

The latest Jobs4TN count shows about 7,000 open jobs in NE, Tenn. Most of them are in the low-paying parts of the service economy. But there’s also a crunch in the upper middle pay ranges for health care and other skilled workers who can make more money in other areas.

Workforce training is one way to stem some of the lack of local workers. But retention of the workers is the other half of the issue. The Tri-Cities has the status of a low-pay region. Affordable housing, cheap rents, and a low cost of living helped balance that in the past. But housing costs have boomed, and rents are up dramatically. That brings up a shortage of workforce housing that complicates attracting and retaining those workers in the lower and medium pay jobs that account for most of the local labor shortage.

It’s a big issue with no simple solution. But expanding the perception of “how’s the labor market doing?” beyond the headline U3 unemployment rate is one small step.

©2023 donfenley.com


Categories: BLOG, TRENDS

1 reply

  1. Don, your posts on egg prices and local employment issues I read this morning are really superb. I admire your determination to prevent local political biases from limiting the scope and conclusions of your analysis. Stay brave. Best wishes and Happy New Year.
    Debbie Arrington

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