Don’t be too encouraged by the slight drop in the unemployment rate announced today:
The American economy lost 247,000 jobs in July, and in a reversal, the unemployment rate fell slightly, to 9.4 percent, the government reported Friday.
Although businesses are expected to keep cutting jobs through the rest of the year, the Labor Department’s latest figures offered some faint signs that the sinking job market was approaching bottom.
The Bureau of Labor Statistics’s report is here.
When payrolls continue to decline and the unemployment rate declines, too, I would interpret that as workers becoming discouraged or otherwise leaving the workforce. The good news won’t be a great deal more than spin until the workforce starts increasing and I can’t see that happening for a long, long time.
I see that Daniel Indiviglio interprets the numbers in much the same way that I do:
As a recession drags on for this long, and people are unable to find jobs, they begin leaving the workforce. They become discouraged regarding job prospects. BLS offers an unemployment rate that includes these discouraged workers. In June 2009, that was 10.1%. For July, it was 10.2%.
Given this change in unemployment including discouraged workers, I think it’s pretty clear that the 0.1% decrease in the reported unemployment rate can be misleading. In reality, those who would like a job but don’t have one increased by 0.1% up to 10.2%.