The Long Hard Slog to Full Employment

The unemployment rate fell again, hitting a three-year low of 8.1 percent. But, as the New York Times explains:

The unemployment rate ticked down to 8.1 percent in April, from 8.2 percent, but that was not because more unemployed workers found jobs; it was because workers dropped out of the labor force.

The share of working-age Americans who are in the labor force, meaning they are either working or actively looking for a job, is now at its lowest level since 1981 — when far fewer women were doing paid work. The share of men taking part in the labor force fell to 70 percent, the lowest number since the Labor Department began collecting these data in 1948.

Of course, if you are a glass-half full guy,  you might interpret the numbers a bit differently:

“Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression”said Alan B. Krueger, chairman of the Council of Economic Advisers, “but much more remains to be done to repair the damage caused by the financial crisis and the deep recession.”

At what point are we going to stop looking at the unemployment rate as an indicator of economic health? If people keep dropping out of the labor force at this rate, we might simultaneously have “full employment” and new record lows in workforce participation just in time for election day.

4 thoughts on “The Long Hard Slog to Full Employment

  1. I think work, as work, for its own sake is vastly over rated. The quality of work and the quality of life are more significant albeit immeasurable factors. Personally, I am glad that more people are working less. Perhaps with all the additional free time, persons will focus on family, personal and spiritual development. There’s nothing like tough times to sharpen the focus on what is truly important.

  2. The unemployment rate is just an index after all, not an absolute measure, and as such is only valuable if it acurately documents trends. Using it as a measure of overall economic health is foolish, however understandable the impulse to do so may be. While the economy is bumping along the bottom, as we see these days, the rate of unemployment understates the severity of the broad economic problem and overstates the health of the economy. When the economy is booming, and employment is high, there can be a tendancy for understatment because everyone that can be hired perhaps already is. But even as a trend indicator the unemployment rate, by iteself, is largely useless. If you don’t know the labor participation rate, then the drop from 8.2% to 8.1% looks positive, in both absolute and trend terms.

    So measuring and reporting the unemployment rate is important, but only as one data point among many to be used when assessing the health of the economy.

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