Why Did the Labor Force Shrink So Much in August?

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From the LA Times today:

The Labor Department said the jobless rate dropped over the month, to 8.1% from 8.3% in July, but that came as many people dropped out of the labor market. In a nation where the population is growing, a shrinking labor force suggests that many workers are giving up job searches because they are striking out in the employment market or don’t see good prospects.

That’s what you’d think, all right. And yet, although the number of people not in the labor force shot up by about half a million in August, the number of “discouraged workers” didn’t budge. So what caused the labor force shrinkage?

Beats me. But BLS data does suggest one thing: the shrinkage came almost entirely among those with a high school diploma or less. Among that group, the labor force shrank by 637,000. Among those with bachelor’s degrees, the labor force grew by 707,000. This is for workers 25 and older, so it has nothing to do with an influx of college students graduating this summer (and I’m using seasonally adjusted figures anyway).

I’m not sure what this means. Maybe it’s just noise. Or maybe I’m not reading the data carefully enough — an occupational hazard among us amateurs. Still, something seems a little off here. Why did so many high school grads (and dropouts) leave the labor force?


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