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December 2, 2011

Unemployment drop isn't as impressive as it seems

As the wire reports say, November's unemployment drop from 9.0 percent to 8.6 percent puts the jobless rate at its lowest point in more than two years. But there are still more than 13 million unemployed folks -- Americans who want to work, have looked for a job in recent weeks and haven't been hired. And that doesn't count the folks who have given up. If you want to work but you're not actively looking for a job, you're not counted as unemployed.

Hundreds of thousands seem to have given up looking last month, which is what partly explains the drop in unemployment. That doesn't seem like huge progress. And, as Bloomberg notes:

The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more increased as a percentage of all jobless, to 43 percent from 42.4 percent.

The separate sample of payrolls showed a seasonally adjusted gain of 120,000 jobs, which is about what economists expected. But that's not nearly enough to provide work for everybody who wants it. The population and the labor force keep growing. The job base needs to grow faster than the labor force to put the country back on the right track.

Posted by Jay Hancock at 8:45 AM | | Comments (6)
Categories: The Great Recession


How many of those 120k jobs were part time retail for the holidays?

Would you like that gift wrapped?

Jack -- the numbers are seasonally adjusted. They remove the holiday hiring effect. This is net of holiday hiring. JH


American workforce: 156,000,000
unemployment rate of 9%: 14,040,000 without work.
Unemployment rate of 8.6%: 13,416,000 without work.
Difference between the two: 624,000

No longer looking: 315,000
New jobs: 120,000
Total: 435,000

624,000 – 435,000= 189,000 seems to be missing in the numbers.

Anonymous, the jobs number comes from a survey of business establishments and the unemployment data comes from a survey of households, so they're not going to match (although they tend to even out over the long term).

The problem I have is that journalists and analysts often attribute a decline in unemployment to people leaving the labor force. As the denominator in the unemployment rate calculation, if the labor force decreases, then the unemployment rate would go up, not down. These people are assuming that those leaving the labor force are all discouraged jobseekers who are no longer being counted. However, the data doesn't really confirm this.

The number of discouraged and marginally attached workers increased less than the decrease in the labor force, so it seems possible that a good bit of the decline in the labor force is simply due to baby boomers retiring.


You're half right/half wrong with your fraction math.

Yes, the denominator drops, but so does the numerator, by the exact same amount. Check an example for how it works.

Say the work force in Oct was 150 million and there were 15 million out of work.

Now say 200k who were out of work give up looking for jobs and the work force in Nov falls to 149.8 million with "only" 14.8 million actively seeking work to be counted as unemployed.

Rate in Oct was 10.0%.
Rate in Nov was 9.9%.

Kudos to Jack Daniels for taking a closer look at the numbers. Let's not forget those who have given up finding jobs, as well as those who want full-time, but are now only working part-time. Finally, the % of Americans working now (as a % of the adult population) is the lowest it has been since the Great Depression. As one of my Pharmacy professors always said, "Figures lie and liars figure"...

Josh, you make a good point, but you're assuming that everyone who left the labor force was out of work and looking for a job.

The labor force shrank by about 507k. However, according to the BLS press release, the number of "discouraged workers" increased by only 129k, and the number of "marginally attached to the labor force" increased by only 36k. What was everyone else's status?

It's does seem discouraging that the labor force participation rate declined so much, and that seems to be the general consensus, but maybe that's partly due to changing demographics? I don't know, just pondering.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.

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