1. What are three impacts of a low labor participation rate? (From the article)

2. Write a short paragraph on the differences between the unemployment rate and the labor force participation rate.

3. What are the long term and short term economic factors that affect labor participation rate?

Article:

Participation Rate Reveals Real State of the Jobs Market

John Shipman, August 03, 2012

This morning's nonfarm payrolls report included one piece of data most people skip, the participate rate. This is the percentage of people who are able to work who actually are part of the labor force (working or not). The lower the number, the more people who have dropped out of the labor force.

With a 63.7% labor force participation, "conditions in the labor market are considerably worse than indicated" in July's report, writes economist Joshua Shapiro at MFR.

"Indeed, if the participation rate were at 66%, which is around where it hovered for many years ahead of the recession, the headline unemployment rate would be a little more than 3pp higher than currently reported," he writes.

Meanwhile, drop in the participation rate "has been centered in younger workers, who are increasingly giving up hope of finding a decent job," and instead staying in school "and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding."

You can see the participation rate data on the Bureau of Labor Statistics site here.

The participation rate isn't something that gets plugged into the algos on jobs day, but the number illustrates the true state of the work force even better than the headline numbers, the jobs added and the unemployment rate.

The bottom line, and it hasn't changed, is that there aren't enough people working in the U.S. to contribute to growth, to contribute to the tax rolls, to help the nation grow its way out of its problems. So the headline number of 163,000 this morning was nice, but it didn't change the real dynamics of the work force or the economy.

-- Paul Vigna contributed to this post.