Big Drop in Ohio Unemployment Rate Due to Disappearing Workers (Same Goes for Rest of U.S.)

How is the Ohio economy really doing? Great find by Jason Hart of Media Trackers:

Ohio’s unemployment rate paints a misleading picture of the state’s economy, an Opportunity Ohio report and separate Media Trackers analysis reveal. The unemployment rate reported by the U.S. Bureau of Labor Statistics (BLS) dropped from 10.6 percent in July 2009 to 7.2 percent in August 2012, but the change resulted from a shrinking labor force as opposed to strong job growth.

In a paper released October 23, Opportunity Ohio founder Matt Mayer wrote, “when accounting for all the workers who are unemployed and who have left the labor force, the true unemployment rate in Ohio is most likely 9.3 percent.”

Indeed, this is an issue I have been highlighting at the national level.

When President Obama took office, the labor force participation rate was 65.7% vs. 63.6% last month. If the LFP had just stayed steady all of this year, the unemployment rate would still be in the mid 8% range.

When the unemployment rate fell sharply under Reagan over the same period — from 9.2% in September 1983 to 7.3% in September 1984 — the LFP rose to 64.1% from 63.5%. Optimistic Americans were pouring into the job market and finding jobs. The economy was booming — and would continue to boom for a generation.

Bottom line: The decline in the unemployment rate under Reagan was a sign of underlying economic strength. Under Obama, the decline in the unemployment rate is a sign of underlying economic weakness.