Discouraged workers are continuing to exit the labor force after giving up hope of finding a job, driving down the unemployment rate as they exit a new Gallup unemployment survey found.
The survey, conducted midway through the month of May, found that the unemployment rate – as measured by Gallup – declined from 8.3 percent in April to 8.2 percent in mid-May.
Gallup’s survey is different from the official unemployment rate compiled by the federal Bureau of Labor Statistics (BLS) in that the Gallup survey is a 30-day tracking survey conducted from mid-April to mid-May. In contrast, BLS conducts its survey over one week in mid-May.
The Gallup survey found that unemployment – slightly higher than the official rate of 8.1 percent – declined slightly. However, Gallup also found that the workforce participation rate – the percentage of eligible people working or actively looking for work – also declined slightly from 67.8 percent to 67.5 percent.
Recent declines in the official unemployment rate have been due in large part to similar declines in the workforce as discouraged workers gave up looking for work.
The official unemployment rate has steadily fallen from its post-recession high of 10 percent nearly a year and a half ago, to 8.1 percent today. However, job creation has been at or below 250,000 jobs per month for much of that time.
As job creation has continued to be so low – barely enough to keep up with the natural growth in the working-age population – the declines in the unemployment rate have largely come instead from discouraged workers leaving the workforce.
Gallup’s mid-month survey suggests that this months-long trend of discouraged workers fleeing the workforce is continuing in May.
“Much of this decline may be due to a decline in the workforce participation rate – Americans 18 years or older who have a job or are actively looking for work – which fell to 67.5 percent in mid-May from 67.8 percent in March. As people get discouraged and drop out of the workforce, the unemployment rate tends to decline,” Gallup said in a May 17 news release accompanying the poll.
Gallup found other results that could point to discouraged workers still leaving the workforce – among them a smaller decline in the unemployment rate than a year ago and a decline in the under-employment rate.
Under-employment – unemployed persons and those working part-time because they cannot find full-time work – fell from 18.2 percent in April to 18 percent in mid-May, Gallup found.
Gallup also found that the decrease in the unemployment rate – typical for this time of year – was not nearly as large as last year’s decrease, suggesting that employers may not be hiring as much this spring as they did last spring due to the sluggish pace of the recovery.
“[C]ompanies tend to increase their hiring during April and May. However, this year's slow economic growth and some extra hiring earlier this year may have employers holding back to some degree from their normal hiring increases.”
Gallup noted that its findings – while usually in sync with the BLS figures – now show significantly higher unemployment and underemployment than the official figures. Gallup said the official figures were “inconsistent” with the state of the economy.
“Gallup's unemployment measurements now and in April stand in sharp contrast to those the government provided,” Gallup said. “The BLS reported an April unadjusted unemployment rate of 7.7% and an adjusted unemployment rate of 8.1%. These findings were generally seen as inconsistent with the state of the economy and the findings of the BLS payroll survey.
“There were not enough jobs created last month – even after the size of the workforce declined – to lower the unemployment rate as much as the government reported,” Gallup added.