December 2010: Unemployment Statistics Explained

The Bureau of Labor Statistics recently reported a decrease in the unemployment rate by four points during the month of December of 2010–from 9.8 percent to 9.4 percent. This would seem like good news, since the unemployment rate has been hovering at around 9.8 percent for many months. But when we look at the raw data, we see that the situation isn’t as optimistic as first indicated, and that the reasons for the drop in unemployment are far more insidious than we’d like.

For the month of December, the BLS reported a growth in the number of employed by 297,000 people. However, the number of unemployed decreased by 556,000 people. If you find these numbers a bit puzzling, you’re not alone. Where did those remaining 259,000 unemployed people go? It turns out that the civilian labor force, the total number of people currently either working or looking for work, decreased. The BLS refers to those people who left the labor force as either “marginally attached workers,” people who had looked for a job within the last 12 months but had stopped within the last four weeks, or “discouraged workers,” who have been without work for so long that they no longer believe there to be any jobs in the market. These people are not counted in the labor force, and their exodus from the labor force allows for the four point drop in the unemployment rate with only a surprisingly slight increase in the number of employed.

At the same time, the Civilian Non-institutional Population (anyone 16 or older and not in an institution such as a prison) increased by 174,000, offsetting the growth in employment so that the employment-population ratio only increased by a tenth of a percentage point. We can assume that none of these newcomers to the population actually joined the labor force, because the labor force decreased by 434,000–almost an exact sum of those who left, and those making up the population increase.

All this goes to show that we shouldn’t take all statistics at face value. The news media out there generally only report on the unemployment rate. Even though that rate went down, which is good, we shouldn’t lose sight of the story behind it. The rate would drop to zero if everyone simply left the labor force, but that wouldn’t solve the problem of unemployment. All this means is that we have a lot more work to do in terms of consistent job creation in this country.

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