September 29, 2023

Florida TaxWatch Economic Commentary

The unemployment rate is not the whole story

Florida's unemployment rate of 5 percent is good news, but not the whole story. An underlying factor that determines whether the job market is truly positive is the labor force participation rate (LFPR).

| 3/24/2016

“Discouraged” workers

Another factor that influences the labor force participation rate, while also affecting the unemployment rate, is the presence of “discouraged” workers. Typically these workers have been unemployed for an extended period of time, yet have given up their job search because they believed no jobs are available for them or there are none for which they would qualify.10 These individuals are not counted in the labor force or considered when calculating the unemployment rate. This in turn leads to a somewhat false representation of the true number of individuals that are unemployed. While discouraged workers have always been kept out of these metrics, their presence has become more prevalent in recent years. In 2014, the Congressional Budget Office stated that one reason for the drop in the LFPR across the nation is “the unusually large number of people who have decided to not look for work because of a lack of job opportunities.”11 By the last quarter of 2015, Florida had 55,700 residents who were considered discouraged.12 Had these residents been counted in the labor force and considered in the unemployment calculations, Florida’s unemployment would have increased by more than a half of a percent to nearly 6 percent.13

Delayed entry to workforce for young adults

This Florida TaxWatch Economic Commentary is also available in PDF format:
"The Unemployment Rate Is Not The Whole Story"

While the elderly population is retiring, the vacancies in the labor force are not being filled at the same rate with the young population. Over the past 15 years, participation in the Florida workforce by residents under the age of 44 has fallen at a low but consistent rate.14 This is in part due to the fact that younger adults have placed a higher value on their education. In the past 25 years, the number of individuals enrolled in post-secondary institutions has increased by more than 52 percent nationwide.15 The emphasis on job training at post-secondary institutions is a side effect of an advancing job market. It is projected that by 2020, 65 percent of all jobs will require a post-secondary education.16This advancement in the job market has delayed individuals from entering into the labor force while they seek an education and/or job training. The end result has created a situation where more individuals are leaving the labor force than can be replaced.

Boosting the Labor Force Participation Rate

The federal government and the state of Florida have acknowledged the need to increase the LFPR. Examining the main factors that cause a decline in the LFPR, one factor in particular sticks out. Discouraged workers are taken out of the workforce because they believe that there are not available jobs or jobs that suit their skill set. Addressing these concerns, the federal government and the state of Florida have passed initiatives that help create jobs, and help arm individuals with the skills they need to compete in the modern workforce.

In 2014, President Barack Obama signed the Workforce Innovation and Opportunity Act (WIOA) into law.17 While the law covers various aspects of job training, it in part provides educational opportunities for adults to help better train them with the skills that are desired in their area. WIOA is partnered with Career Source centers in Florida and has been championed by the governor and the Department of Economic Opportunity in Florida.18The partnership with Career Source Florida grants residents in Florida access to career counseling, career planning, job training, and other resources that are valuable to discouraged workers. The program gives these individuals a resource that helps them get back into the workforce.

The state also uses incentives to help bring businesses to the state. Enterprise Florida, a public-private partnership, is the state’s principal economic development tool. Tasked with incentivizing companies to relocate or expand in the state, Enterprise Florida’s main goal is to increase job opportunities available to Florida residents. Increasing the access to available jobs is key to helping discouraged workers get back to work, as well as helping to increase the labor force participation rate.

10 Discouraged Workers as defined by the United States Bureau of Labor Statistics.
11 Getting Workers Back Into the Workforce. The PEW Charitable Trust. April 7, 2014.
12 The Federal Reserve Bank of St. Louis data.
13 Florida TaxWatch Analysis of United States Bureau of Labor Statistics and The Federal Reserve Bank of St. Louis data. Data published as of March 1, 2016.
14 Trends In Florida Labor Force Participation. Bureau of Economic and Business Research. February 10, 2016. *As it relates to the percentage share of the overall participation rate
15 Where Are All the Workers? U.S. News & World Report. July 16, 2015.
16 Carnevale, P. Anthony. Smith, Nicole. Strohl, Jeff. Recovery. Georgetown University.
17 OCTAE: Workforce Innovation and Opportunity Act. U.S. Department of Education.
18 Workforce Services: Workforce Investment and Opportunity ACT (WIOA). January 2016.

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