Outside the Labor Force

Every month, the U.S. government releases its employment report. One of the highlights of the report is the unemployment rate. This stat represents the lobster dinner of economic figures. Along with GDP, the unemployment rate provides the most commonly cited measure of how the U.S. economy is doing.

The unemployment rate measures the percentage of people in the labor force who can't find a job. This is pretty straightforward. Low unemployment means most people have jobs. Most people are getting paychecks, meaning that most people can afford mortgages, cars, Internet connections, Sea-Doos, bejeweled dog collars, decorative salt shakers, etc...all the fuel that makes the consumerist economy go 'round.

There's a catch though. The unemployment rate isn't calculated by dividing the number of people without jobs by the total number of people in the country. Instead, the number gets divided by the number of people who want a job.

There are plenty of people who are perfectly content not having a job. And these folks aren't just deadbeats and frustrated screenwriters. There are children and college students, housewives and househusbands, retirees, lottery winners, jet-setting heiresses, grifters, beach bums, and the like.

This fact means that there are actually three groups related to the labor market: 1) people who have jobs, 2) people without jobs who want to get a job, and 3) people outside the labor force.

The government defines this third group as "persons who are neither employed nor unemployed," which sounds like a Buddhist riddle or an ancient prophecy about the type of hero who will eventually slay a mystical dragon. The Labor Department also includes the slightly more concrete definition, though, saying that a person outside the labor force is a person who is "neither working nor seeking work." Mazel tov to them.