Are Michigan's Record Labor Force Gains Real?

Many people have stopped looking for work and are thus out of the labor force. This is one of the criticisms of the nation’s current economic recovery. The labor force participation rate has declined and this is a sign of fewer good opportunities. Michigan, however, just posted record gains in labor force growth. 

Michigan added 27,000 people to the labor force from December to January and 32,000 people from January to February. Michigan has not posted a monthly gain of more than 20,000 in the labor force in the entire data series except for once — the month after the 1998 GM strike ended. These data go back to 1976.

There is a question about whether these reports are a surveying or modeling error. Monthly surveys are the most timely, but they are not as comprehensive as other economic data.

Don Grimes at the University of Michigan is not sure about whether these two months indicate record labor force gains. He pointed out that the Bureau of Labor Statistics is using new estimation methods, noting, “The household data series has been very strange these past few years, even at the national level. Traditionally, the establishment series has been both more consistent and reliable, but for several years it was off too, until revised using the Quarterly Census of Employment and Wages.” 

Data also get smoothed during annual revisions. Unless the state keeps adding record levels of people to the labor force, these are likely to be mixed in with other months of less impressive labor force gains.

But if these gains are real, it is the mark of a strong economy. There was an even larger growth in employment in addition to having more people in the labor force. In other words, it is a sign that there are both more people looking for work and more people finding it.

Michigan’s labor force fell substantially more than the population decreases from 2000 to 2011. It is possible that a thriving economy can attract large numbers of people back into the labor force in a way that is more significant than Michigan has seen in the recent decades.