As the figure shows, the share of employed workers 25-54 plunged dramatically from the start of the Great Recession through the fourth quarter of 2009, and then, for nearly two years, essentially bumped around at the bottom of that extremely deep hole. Since the fall of last year, the ratio has just begun to show signs of improvement.
This means that the improvement in the unemployment rate, from 10.0 percent in Oct. 2009 to 8.1 percent in April 2012, has largely been due to people dropping out of, or not entering, the labor force—not to a larger share of potential workers finding work. This also means that while expansionary policies to generate demand are urgently needed and will help spur job growth, they may also generate upward pressure on the unemployment rate as these missing workers begin to enter or reenter the labor market. That kind of upward pressure on the unemployment rate would be a positive sign.
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