Unemployment at 5.8%? Here’s the Number That Really Matters
By Mike Cassidy | The Fiscal Times
Here’s a riddle for you: Today, there are 1.2 million more 25-to-54-year-old American workers who are unemployed than there were in 2007 (adjusting for population growth). But 3.7 million fewer of them have jobs. How can that be?
… To be counted as unemployed, you have to be actively looking for a job. Those who have endured long bouts of unemployment and given up hope of finding work are left out of the calculation. So when we see the unemployment rate declining, it might be that hiring is picking up. But it could also be the case that more people are dropping out. Without additional information, we can’t tell.
… By not counting the dropouts, many media accounts—and even some serious policymakers—paint an overly rosy portrait of job market health. It’s the economic equivalent of grade inflation… Only through an honest assessment of our standing can we avoid a rude awakening for our policy grades.