Labor Force Participation Continues To Lag In W.Va.

Last week, national and state officials released unemployment numbers and they show significant improvement from the height of the pandemic. But in context they may not be as rosy as they seem.

Eric Douglas spoke with WVU economist Heather Stephens to give those numbers some context. She explained that while low unemployment numbers are good, a bigger issue facing West Virginia is the low labor force participation rate.

Douglas: What I want to talk about is his unemployment figures and what they all mean. 

Courtesy photo

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Courtesy Photo

Stephens: One of the concerns I have had for awhile about focusing on unemployment rates is the issue of labor force participation. As you probably know, West Virginia has the lowest labor force participation rate in the country. It has for a very long time.

You can see that the unemployment rate in September in West Virginia is very similar to the nation. That’s good, right? According to this report, 4.8 percent is the seasonally adjusted September rate for the nation, and we’re actually slightly below it at 4.6. Okay, so that does seem good news. And again, I caution against using the non-seasonally adjusted numbers, because the seasonally adjusted numbers account for the seasonality of employment. You have things like school starting and holidays, and recreation employment.

Douglas: But even tourism theoretically should be down. Construction should be down or maybe not yet. Maybe that’s it goes a little later in the year, but now with people going back to school and that sort of thing, too.

So just for perspective, labor force participation is everybody 16 to 65…

Stephens: Labor force consists of people that are currently working or looking for a job. It’s problematic to have a low labor force participation, because it suggests there’s a lot of people that are of working age that are sitting on the sidelines of the economy.

And this has been a concern of mine for a while. I did some research a couple years ago, trying to see if we could explain this labor force participation shortage in our state. And even after we control for all the things we know about the state and about counties in our state, like education levels, demographics, the industrial structure of places, all of those kinds of things, we still have a lower labor force participation rate in the state than we should.

Douglas: So this is just people who’ve just stopped altogether, they’re not in contact with Workforce West Virginia, they’re not working anywhere.

Stephens: Some of the national drivers, I’m sure, are some of the same drivers here in West Virginia like access to childcare. There’s been a big drop out of women with children dropping out of the labor force in the current situation. We’ve also had people in low-wage jobs, where they’re in high-contact situations, decide it’s not worth working to take the risk, and frankly, we have high COVID rates in the state and a low vaccination rate. And so if you’re not making much money, and you’re taking on this risk, the incentive to stay in the labor force is probably lower.

We are also in a situation where, by my estimates, since September of 2019, which would be the last time I would feel confident comparing numbers, the number of employed residents in the state is down by 6,000 people in West Virginia,

Douglas: There are 6,000 fewer jobs.

Stephens: Right now, compared to September 2019. It looks like we have a better unemployment rate. In September 2019, the unemployment rate was 5 percent. And now the seasonally adjusted one is 4.6 percent. Yes, that looks like an improvement. And so these are the labor force numbers for West Virginia, in August and September of 2019 versus August in September of 2021. The change from 2019 to 2021 is a decrease of almost 7,000 people in the labor force. And one month later, we’re down by almost 10,000 people. So while the number of unemployed is smaller, so is the base. And even between August and September of this year, we’ve seen another 1,200 people drop out of the labor force. This is a big problem.

The national labor force participation rate is 61.6 percent. In West Virginia, it is 55.2 percent.

Douglas: So we’re six and a half percentage points below the national average.

Stephens: And we are the lowest in the country. And the next lowest is Mississippi, which has a labor force participation rate of 55.8. And I can tell you that I did some research related to this a couple years ago. And our findings are that higher labor force participation is associated with lower poverty, and especially for rural areas, higher employment growth.