The Commonwealth Institute: http://thehalfsheet.org/post/59687425880/left-out-of-labor-day

Here’s something to wrap your mind around as we head into Labor Day weekend: unemployment is down in Virginia, but fewer people in the state’s economy are working.

Virginia’s unemployment rate of 5.7 percent is down considerably from its peak of 7.4 percent during the winter of 2010. But fewer than 63 percent of working-age Virginians have a job. That’s down from over 67 percent just four years ago, before the recession decimated the state’s economy. The last time fewer Virginians were working was way back in 1982, when the unemployment rate was well over 7 percent. (See Figure 1.)

How can we have a low unemployment rate at the same time that a smaller share of the working-age population is actually working? Here are two reasons.

First, Virginia’s working-age population has increased over 8 percent since the start of the recession, but employment hasn’t kept pace. As shown in Figure 2 below, Virginia’s total employment has grown just under 2 percent since the recession officially began in December of 2007. Simply put, the pool of eligible workers grew faster than the jobs available for them.

Second, Virginians are only counted as unemployed if they are available to work and actively seeking a job. If they stop looking for work, they are no longer considered unemployed and are dropped from the labor force, which is a key part of the unemployment rate calculation.

So there you have it: when a Virginian looking for work loses hope and gives up, the unemployment rate drops, but so does another key barometer of economic health: the labor force participation rate. The fact that both of these numbers are dropping in Virginia is not a sign of progress.

Growing numbers of working-age folks are sitting on the sidelines waiting to get in the game. We need to figure out how to take advantage of new opportunities and resources — like growing the “green economy” and expanding Medicaid — to create enough jobs to meet the need before more people take their ball and go home.

—Sara Okos, Policy Director