\n<\/p>\n
A now hiring sign is posted in the window of a Chipotle restaurant on June 5, 2026 in Los Angeles, California. <\/p>\n
Justin Sullivan | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
On the surface, a June drop in the unemployment rate helped provide some upside to what was an otherwise downbeat jobs report \u2014 but it was for all the wrong reasons.<\/p>\n
That\u2019s because the decline in the jobless level<\/a> to 4.2%, the lowest in a year, came largely from an exodus of workers from the labor force, according to the Bureau of Labor Statistics data Thursday.<\/p>\n In fact, the measure of the working-age population either employed or looking for a job slid to 61.5%, the lowest since March 2021. Excluding the Covid-era jobs market, it was the lowest labor force participation rate in exactly 50 years.<\/p>\n<\/div>\n The decline in the labor force marks a \u201cmassive exodus\u201d driven by multiple factors, said Mike Reid, head of U.S. economics at RBC.<\/p>\n \u201cThe unemployment rate fell to 4.2% as both the number of unemployed workers and the size of the labor force pulled back,\u201d Reid wrote in a post-report commentary. \u201cThis may well be a story of retirements but could also be a story of prior job seekers dropping out of the labor force.\u201d<\/p>\n<\/div>\n Within the bureau\u2019s household survey, where the participation numbers are drawn, is a story of a consistently contracting labor force potentially driven by unemployed workers simply giving up.<\/p>\n In June alone, the labor force, a measure of those either employed or not employed and looking for work, plummeted by 720,000. Similarly, the rolls of those counted as not in the labor force, a group that includes the unemployed and those not looking for work, jumped by 832,000.<\/p>\n And while the establishment survey<\/a>, which counts jobs filled, showed growth for the month of 57,000, the survey of households<\/a>, which counts the actual level of those working, tumbled by 507,000. <\/p>\n On a year-over-year basis, the labor force is down by just over 1 million, while the level of the employed also has fallen by 1.06 million and the ranks of the unemployed have risen by 40,000. The employment-to-population ratio slipped to 59% in June, the lowest since October 2021. All that has happened while the unemployment rate has risen by just one-tenth of a percentage point to 4.2%.<\/p>\n \u201cWhat really affects me is not so much the unemployment rate,\u201d said Dan North, senior economist for North America at Allianz. \u201cWhat\u2019s an important development is the participation rate, and this is a big leg down in one month, and over the past year it\u2019s a pretty big leg down. I think this is a more important number.\u201d<\/p>\n<\/div>\n The drop in participation is sometimes attributed to a shrinking immigrant population and retiring Baby Boomers and Gen Xers. <\/p>\n However, in June the biggest plunge came from what is defined as \u201cprime age\u201d workers, or those between the ages of 25 and 54<\/a>. That rate fell 0.6 percentage point to 83.3%, its lowest since December 2023.<\/p>\n \u201cLooking at the statistics now, that argument doesn\u2019t hold up so well,\u201d North said of the retirement and immigration rationale. \u201cI hate to use the word \u2018alarming,'\u201d he added, but said the numbers are cause for concern.<\/p>\n To be sure, some economists said the June numbers seem out of sort. Specifically, they cited the large decline in leisure and hospitality workers as a sign that the data could be noisy. <\/p>\n But the participation numbers are part of a continuing trend.<\/p>\n \u201cIt was shocking to see 720,000 people stop looking for work entirely and the hospitality sector shed jobs,\u201d wrote Heather Long, chief economist at Navy Federal Credit Union. \u201cIt\u2019s a better job market than a year ago, but opportunities are limited.\u201d<\/p>\n<\/div>\nQuitting the search<\/h2>\n
Not just retirees<\/h2>\n
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