By: Dr. Lynn Reaser
As we, as university professors, face this bittersweet moment when our beloved students leave and venture out into the real world, what will they face in the job market? The answer seems to be “challenging, but not bad.” The economy is creating about 200,000 jobs per month or 2.4 million per year. The national unemployment rate has fallen to 6.3%.
Yet, there are some puzzling and troubling aspects of our labor market. One of the most prominent has been the sharp drop in the share of the working-age population who are either employed or looking for work. In April, a huge 800,000 people dropped out of the labor force. Although monthly changes can be volatile, over the past year, the labor force has hardly increased at all.
Although the aging and retirement of workers accounts for about half of the labor force participation’s drop over the past few years, its decline is troublesome for three primary reasons. First, it reflects an economy not strong enough to encourage individuals to look for and find jobs. Second, it may indicate a skills gap between the qualifications companies need and those possessed by individuals now pushed to the sidelines. Third, a falling or only slowly expanding labor force will constrain the economy’s growth potential since that growth can only come from gains in labor, capital, or productivity.
The U.S. now needs faster not slower growth. College graduates might welcome less competition for jobs, but a continuing drop in labor force participation could jeopardize our ability as a nation to meet all of our obligations and goals.