8.6% Unemployment is NOT Good News
To read the first paragraph of the Bureau of Labor statistics one might think that the jobs situation in the United States has improved significantly.
The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down.
In the detailed data section of the report, the picture becomes much less rosy.
120,000 new jobs were created according to the report. It has long been stated that growth of more than 240,000 jobs per month would be needed to get the unemployment rate to drop this dramatically. How is just 140,000 enough to lower the unemployment rate from 9.0% to 8.6%? Far more jobs have been added in previous months and no such reduction in the overall unemployment rate resulted?
In September, the labor department reported 158,000 new jobs (which has since been revised up to 210,000 jobs). Why was there no .4% change in the unemployment rate in that month?
Also to note is that the number of long-term unemployed (jobless for more than 27 weeks) did not change at all – holding strong at 5.7 million which is 43% of all unemployed persons.
The only answer is that workforce participation must have drastically fallen and the report says as much. According to the BLS report, the civilian labor force participation rate declined by .2%. That can be interpreted to mean that half of the reported unemployment rate drop is due to people giving up on the idea of getting a job – at all.
In February, CDN reported the worst labor participation rates in 25 years at 64.2%. That was the only reason the unemployment rate dropped to 9% at that time. The new BLS report for November shows the participation rate at 64% – and another suspect drop in the unemployment rate is correlated.
Labor Secretary Hilda Solis purports that lengthening unemployment insurance has been successful and is the only answer:
We know what has worked: extending payroll tax cuts and unemployment insurance, and making smart investments in our economy. The clock is ticking. If Congress doesn’t extend emergency unemployment benefits for our long-term unemployed this month, 5 million Americans will lose their benefits next year. These are the everyday heroes of our recovery who have lost their jobs through no fault of their own. They spend all day, every day filling out applications, sending out resumes and looking for work. Now is not the time to turn our backs on them. They deserve better. They deserve action.