Many Leave the Labor Force
The national unemployment rate fell below 8% in September for the first time since the beginning of the pandemic, but that statistic may not actually be good news for the economy. While part of the lower rate reflected people finding jobs, it was also caused by discouraged workers leaving the labor force altogether.
New York state had more workers leave its labor force than unemployed workers find jobs in September. This trend is especially concerning because of the negative effects long term unemployment has on people. The more time someone is unemployed, the harder it is for them to later get a job. Long periods not using skills, difficulties in the interview process and a loss of confidence all present significant challenges to this group even after the economy recovers.
Economists are concerned about what widespread long-term unemployment could mean on both an individual and macro level. One of the most painful parts of the 2008 financial crisis was the length of the recovery, which is one factor that set it apart from other recessions. Many workers lost their jobs in the initial recession and have not worked since. This was a significant loss of economic potential and is something that lawmakers hopefully learned from to avoid as the economy pulls out of this recession.
Optimism of a very swift recovery has been shrinking, so the number of discouraged workers will be something to watch in coming months. Deeper investigates these numbers give investors more knowledge than just looking at headline unemployment, so do your homework to understand the nuances of job reports and what they mean for economic prospects.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.