CNN is reporting that the official unemployment rate has dropped to 8.1% with the release of the nonfarm payroll numbers this morning. At first glance, this might sound like a positive development, but unfortunately, it’s not all good news.
The job market is improving at a pathetically slow pace – just 115,000 new jobs were created in April. The reason the unemployment rate is falling is not because the economy is creating jobs at a healthy clip, but because people are dropping out of the labor force. From CNN:
There are far more jobless people in the United States than you might think.
While it’s true that the unemployment rate is falling, that doesn’t include the millions of nonworking adults who aren’t even looking for a job anymore. And hiring isn’t strong enough to keep up with population growth.
As a result, the labor force is now at its smallest size since the 1980s when compared to the broader working age population.
A person is counted as part of the labor force if they have a job or have looked for one in the last four weeks. As of April, only 63.6% of Americans over the age of 16 fell into that category, according to the Labor Department. That’s the lowest labor force participation rate since 1981. (emphasis mine)
The unemployment rate is falling largely because increasing numbers of the working-age population are no longer being counted as participants in the labor force. If you’re unemployed and actively looking for a job, you’re counted as part of the labor force. If you’ve long since given up looking for a job because you can’t find one, you’re no longer part of the labor force and aren’t counted in the official unemployment statistics.
It makes no sense to me that the government would calculate the numbers like this – unless, of course, it’s trying to make the unemployment situation look a lot better than it really is. Despite what incumbent politicians may claim in an election year, I don’t see how the economy is really getting that much better.