On Friday, the Labor Department reported that 720,000 Americans left the labor force. This exodus pushed the labor force participation rate down to 62.8%, the lowest level since 1978. One out of three adults in neither working nor actively looking for work.

On Friday, the Labor Department reported that 720,000 Americans left the labor force. This exodus pushed the labor force participation rate down to 62.8%, the lowest level since 1978. One out of three adults is neither working nor actively looking for work. 

Some observers attribute the sharp drop to the shutdown and the furloughed federal workers. Even if that were the case, and it is unclear why these workers would be counted as not in the labor force, the number of Americans exiting is still significant. The total number of adults not in the labor force in October rose 932,000 to almost 92 million. (see note below)

Overall, the jobs report showed employers adding 204,000 jobs in October. Almost half of these job gains were in the retail and hospitality sectors. The adult population, however, grew by 213,000, meaning that the better than expected jobs number fell short of keeping pace with population growth. The economy needs to add many more jobs to bring discouraged workers back into the labor force. 

In spite of the gain in jobs, the overall number of Americans with a job fell by 735,000, to less than 144 million. Just 58.3% of adults were employed in October.

The headline number on the October jobs report was good. Gaining jobs is obviously better than shedding them. The continued sluggish pace of the economy, however, is causing ever more Americans to give up looking for work.   

UPDATE: The Bureau of Labor Statistics, responsible for compiling the jobs report, has told CNBC that the government shutdown “categorically” is not a factor in the labor market exodus. It never really made any sense that furloughed workers would be counted as leaving the labor force, but we now have confirmation they weren’t. The 720,000 workers leaving the labor force is one of the largest exoduses in history.