By Justin Lahart
There isn't too much mystery about why the unemployment rate moved lower in June despite a weak jobs report-it was all about a big drop in the number of people in the labor force. But there is a mystery about why the labor force drop was so large.
The main jobs number-the one that showed the economy added a lower-than-expected 57,000 jobs last month-and the unemployment rate come from two separate surveys. For the jobs count, the Labor Department surveys a large number of employers; for the unemployment rate, it relies on a survey of households.
Digging in, the household survey painted a much gloomier picture of the labor market than the employer survey did, with the number of people with jobs dropping by 507,000. But the number of people in the labor force-those employed plus the unemployed (people without work actively seeking employment)-dropped by even more. As a result, the unemployment rate slipped to 4.2% from 4.3%.
The real headscratcher is why so many people dropped out. The labor force as a share of the 16-and-over population slipped to 61.5% from 61.8%, hitting its lowest level since early 2021, when the economy was still climbing out of the pandemic. The drop didn't appear to be driven just by, say, people retiring or young people not entering the job hunt. The labor force participation rate among people age 25 to 54 dropped to 83.3% from 83.9%.
Even stranger, economist Guy Berger notes that people age 25 to 34 were what really drove the drop: Their participation fell to 82.4% from 84%. It looks anomalous, and suggests to him that the overall drop in participation is more about statistical noise than anything else, and will be reversed.
That isn't entirely cheering. If the participation rate had remained steady last month, the unemployment rate would have gone higher, not lower.
This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).