Is the Unemployment Rate Enough to Judge the Economy?
The media, government officials, economists, and nearly anyone else with mainstream attention talks about the unemployment level. They freely use it as a gauge of how well the economy is doing. The unemployment level has essentially become the official thermometer with which to judge the health of our economy.
But is it really enough? Can one figure, one form of measurement, truly be all that is necessary to gain a comprehensive idea of the state of our economy?
The current official unemployment rate is around 6.1%, which is much better than the 10% reached back in October of 2009. It is much closer to the low 4.4% from back in December of 2006. So the economy should be in pretty good shape at the moment, all things considered (all things being the unemployment rate). Right?
Unless you haven’t had an active role or exposure to the outside world, you would know that the answer to the above question is a simple “no”. But how is this possible? How could things be so bad if the unemployment rate says otherwise?
To answer this question, one has to look at more instruments of measuring unemployment than the simple unemployment rate.
For starters, the rates of firings and job openings, as well as monthly job additions, have slowly improved from the lows of the recession.
However, that is really where the good news stops.
The share of unemployed out of work for 27 weeks or more is currently at 32.8%. This figure is much closer to the all time high reached in 2010 of 45.3% than it is to the low 19.1% before the recession.
Actual labor force participation includes those who have a job or are actively looking is at a 36 year low, which means that the people who are actively working and/or looking for work is the smallest percentage of the able-bodied population in 36 years.
The measure of underemployment, or those who only work part time or are just too discouraged to even look for work anymore, is at 12.1%. This is more than 3 percentage points higher than before the recession.
The popular unemployment rate everyone hears about is not even accurate in itself. It is distorted by an increase in retirements from baby boomers and from discouraged workers, as well as some other factors.
The unemployment rate is not entirely wrong. It just is not entirely correct, either. In order to get a more complete picture of the state of employment (or rather, unemployment), people should look into other measures as well, even beyond those mentioned above. Otherwise, the public is being misinformed as to the true state of things. In this particular case, the truth is not as bright as we are all led to believe. Hope is not lost, but much is still needed to be done.