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Friday, October 5, 2012

Fact Check: An 11 Percent Unemployment Rate?


In Virginia on Friday, Mitt Romney said that “if the same share of people were participating in the work force today as on the day the president got elected, our unemployment rate would be around 11 percent.”

Is it true?

Yes, but you'd have to assume that all of the growth in the number of labor force dropouts is a result of discouragement about the job market, as opposed to other factors like the wave of baby boomers now hitting retirement age.

A closer look at big issues facing the country in the 2012 election.

If you had the same labor force participation today as you did in January 2009 (65.7 percent, instead of today's 63.6 percent), that would bring the total number of people in the labor force up to about 160 million, instead of about 155 million.

Then if you assumed that those five million people you added into the labor force didn't get jobs, that would bring the total number of unemployed people up by five million, to a total of about 17 million. That would bring the overall unemployment rate to 10.7 percent.

This exercise, though, assumes that the entire drop in the labor force participation rate from January 2009 to the present is a result of discouraged people giving up on looking for work. It ignores the fact that the baby boomers are hitting retirement age, meaning that demographics would probably bring down the labor force participation rate even if the economy were booming. Gary Burtless, an economist at the Brookings Institution, estimates that half of the decline in the labor force participation rate “can be traced to an aging population.” The calculation above also ignores the fact that a higher share of young people are going to college, and are staying out of the work force temporarily while they improve their skills.

Because of these factors, it's hard to know what the “right” labor force participation rate should be right now. It should probably be higher than the 63.6 percent recorded for September - since there are indeed a lot of discouraged workers out there who want to work but have given up looking - but we don't know precisely how much higher.