October 1 2012
There are a million ways to measure how the economy is faring. All one has to do is turn on a 24 hour news station to hear pundits debate whether the latest numbers are up, or down, or conflicting… it’s enough to give my American family grey hair (or, more than we already have!).
Friday the unemployment rate will be revised with new data from September. This will be the second to last opportunity for unemployment to change before the election, something that could arguably influence the results more than any campaign ad.
But should this one indicator of our economy be the point of focus?
Last month, news venues buzzed that unemployment had dropped two-tenths of a percent – a welcome change in what has been a stagnant jobs market. But the Bureau of Labor Statistics revealed August’s drop in unemployment was due less to job creation and hiring, and nearly entirely to the fact that another 368,000 people left the labor force.
In other words, unemployment dropped because people gave up looking for work, not because the economy improved.
You see, job seekers who cannot find work and so quit working are not counted in the standard unemployment rate. If you add in everyone who is looking for jobs, discouraged workers, and those who took part-time work but want to work full-time, the unemployment rate reached 14.7 percent.
Keith Hall, a scholar at the Mercatus Center, has done extensive studies on the unemployment rate and whether or not it is an accurate gauge or our nation’s recovery (to see his chart on participation in the labor force, click here). Since the recovery has been exceptionally slow, more and more people have dropped out of the workforce. Hall argues the recovery has been substantially worse than most assume. If you were looking at the unemployment rate, you would never know.
Most Americans are tired of campaign commercials, speeches, and empty promises. When deciding whether or not to go out to the polls this November, Americans should carefully consider developments in the whole labor market.