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February unemployment did not drop

Friday, March 9, 2012

Despite nonfarm payroll employment rising 227,000 in February, according to a news release from the Bureau of Labor Statistics, the official US unemployment rate remains unchanged at 8.3%. This seems to contradict recent reports of lower weekly unemployment filings. Nevertheless, today’s report actually can be looked at as good news.

The reason that I say this is not just that it is good that unemployment did not increase. In fact, something happened that will not be discussed by most economists. Actually, what occurred is unemployed people who had removed themselves from the official workforce rolls are now re-entering job market. So, the bottom line is that more people in America are working. And, that is very good for the future of our economy.

As I explained to my economics students when I taught at Jacksonville State University and Faulkner University, the unemployment rate is a ratio of unemployed workers versus the total number of people currently employed or actively looking for work. When long-term job seekers give up, the size of the workforce shrinks thereby giving the false impression that things are getting better when they are not. Therefore, when the Republican presidential hopefuls criticized recent gains in the employment rate being due to people quitting their job search, they had the right idea. However, that no longer seems to be the case. I suspect that if weekly jobless claims continue to fall and employers continue to add jobs, the realistic employment picture will actually be quite good.






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Keywords: unemployment rate, Bureau of Labor Statistics, employment, jobs

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