Friday, December 6, 2013

The falling unemployment rate is actually bad news

As I’ve noted repeatedly in recent months, the unemployment rate is an odd measuring stick for the health of the labor market. It basically tells us how many people are looking for work. It falls when people get jobs, which is good. But it also falls when people stop looking for work, which of course is not so good.

In recent years a lot of people have given up on looking for work. As a result, the unemployment rate has gradually declined from 10 percent to 7 percent even as the share of American adults who are working has remained basically steady.

It’s easier to see the trends if you skip over the government’s wacky data for the month of October, and compare November with September. The number of people that the government counted as unemployed fell by 348,000, driving the unemployment rate from 7.2 percent to 7.0 percent. But the number of people with jobs only increased by 83,000. In other words, for every person who found a job between September and November, three other people stopped looking.
--Binyamin Appelbaum, NYT, on the discouraged American economy