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Low Unemployment Rate – Not the Whole Story

September 18, 2019

We frequently see headlines about the low unemployment rate but one should ask how is this measured. The rate is the lowest in 50 years. You might conclude with such a low number; employers will pay more to hire you. Or, if you want to find a job you can.

Unfortunately, this number is misleading. It doesn’t measure people who have dropped out of the job search.  In the federal government’s calculations, if you stopped looking, you are no longer unemployed. The additional measurement to include would be the statistic titled “Labor Force Participation.”

In June, only 62.9% of the labor force was employed – close to its low in 1977. Why? There is speculation as to why this is occurring. Some feel it is because:

  • People can’t find the job they want;
  • They may not be qualified for the jobs available;
  • One spouse may earn enough for the household

Economist are concerned because those no longer seeking employment do not contribute to the economy with goods and services produced. Some are concerned people not in school or employed may become involved with anti-societal behavior.

From a political standpoint, having a low unemployment rate is a positive. However, it is only part of the picture. But politicians have never been known to want to advertise negative news so it is unlikely the labor participation rate will get equal press to the unemployment rate.

So when you see the paper reporting the unemployment rate, realize you are only seeing part of the picture.

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