If the unemployment rate jumped in June, it may be an encouraging signal of optimism. If it fell further, it could be worrisome.
That may sound contrarian as investors await the monthly jobs data due out on Friday in the week ahead. After all, a falling unemployment rate is the gold standard of economic prosperity. But with the unemployment rate showing 5 percent or below for almost two years now, the job market is starving for labor. And it’s mid-career workers who aren’t showing up.
The June jobs data will capture new college graduates leaving campus and entering the workforce. Those first jobs are important. The economy also needs to see older workers getting back into the game. Barely eight of out of 10 working Americans between the ages of 25 to 54 are part of the labor market. During the booming economy of the 1990s, the participation rate for that age group was more than 2 percent higher. At that rate, today that would mean two million more working Americans.
Much has been made about Baby Boomers disappearing from working America. They have and will continue to. However, the participation rate of people 55 and older in the workforce has been steady since the Great Recession at 40 percent. Not so for people who should be in their prime working — and earning — years.
The way the government reports the headline unemployment data requires someone to actively be interested and looking for work. Those not doing so are not part of the commonly reported unemployment rate. While the labor participation rate of 25- to 54-year-olds has been slowly climbing after hitting a post-recession low two years ago, a meaningful slice of Americans in the middle of their careers continue sitting out this period of economic growth.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.