The official unemployment rate packs a big news punch. Politicians seize on it as evidence policies are working or not, and pundits comb through the data and ponder how changes might impact the political climate.
IWF wrote about the latest unemployment numbers, pointing out how many factors contribute to drops in the unemployment rate, including unemployed workers leaving the labor force. Robert Samuelson writes on this today, and describes some of the factors that will play into the unemployment rate in the future. He notes that our official labor force may continue to dwindle (more people retiring, younger workers staying in school, etc), which would pull the unemployment rate down, but not be evidence of good economic times ahead.
It's important for Americans to be able to put statistics like this in context. Yet I think that Samuelson may overstate the role that the number has in politics today, or will play in future elections.
Conventional wisdom is that a dropping unemployment rate is good news for the President and the incumbent party, while a rising rate would give new energy to the throw-the-bums-out movement. That may be true, but only to the extent that the unemployment rate is an actual barometer of the economy.
The American people aren't going to be fooled by statistics, even those hyped by the media. In late September, Gallup found that more than three in four Americans think the economy is no better than it was a year ago, with 42 percent believing that the economy had gotten worse.
Gallup also found Americans pessimistic about the future with 61 percent believing that there wouldn't be improvement over the next year. Americans aren't natural pessimists. In 2009, two-thirds expected the economy to improve during the next twelve months. About half of those former optimists are now pessimists.
More than eighty percent of Americans today believe we are in a recession. Technically, we aren't in a recession and haven't been for awhile. It's not a term that the media uses to describe our current economic situation. But it feels like a recession. It feels like things are getting worse, not better, and that's why Americans worry.
Americans seem more aware than before of the potential for media, as well as political, manipulation. They know that parties and candidates have an interest in painting a certain economic picture. I think they are instead increasingly relying on other information to gauge what the future holds. How are your neighbors doing? Is that bright cousin of yours who just graduated with honors employed? Is your business expanding?
We take this information from our personal experience and then put it in the context of the news we hear about the economy in general. Unemployment is down? Well sure, I know Susie got a temp job helping out on Christmas sales, but she's only guaranteed work through the first week of January. The stock market had it's biggest jump in years? Why? Good news about the European financial crisis? What was that exactly? The U.S. is making it easier for them to borrow from us…but aren't we broke? That doesn't make any sense to me…
I imagine these are the conversations that take place across the country, among our increasingly skeptical populace. It may be hard to sense slight ripples in the economy, but the truth about the economy seeps through. Americans know our economy is in trouble, never-mind what the latest statistics say.