Confusion over unemployment

Date posted: March 16, 2012

The last national jobs report was considered a good one: Jobs were up and the unemployment rate was down. Yet some analysts say these results were misleading because they don’t account for workers who have dropped out of the labor force and aren’t counted as jobless. So, what’s the correct way to look at the report? N.C. State University economist Mike Walden responds.

“First of all, you are absolutely right that the unemployment rate that’s typically quoted — we call (it) the headline rate — does not … include as unemployed those folks who have dropped out of the labor force and stopped looking for work. However … the government does calculate an unemployment rate that does include those folks, as well as a further unemployment rate that includes people who are working part-time only because they can’t find full-time work.

“And what we saw in the January unemployment report is all of those rates went down. So, it is true the headline rate doesn’t include so-called discouraged workers. But the unemployment rate that does include discouraged workers also went down. So, I think on the matter of the unemployment rate, we did see improvement in January.

“Now another issue that’s come up is simply in counting people who are employed. And if you look at the January numbers of employed compared to the December numbers, you actually see when you look at what’s called the non-seasonally adjusted numbers, you see a decline in unemployment. But we all know that from December to January there are going to be a lot of folks who are let go from temporary jobs, temporary Christmas jobs. And we see this every year. So, what the government does is they’ve come up with what’s called a seasonal adjustment. They have calculated … the average number of people that are going to be unemployed in January because they’ve lost their temporary jobs. They factor that into the numbers, and they come up with a new seasonally adjusted number, which all economists look at. That’s the number where we actually saw a gain in workers, about 240,000 workers more nationwide in January versus December.”

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