If you find yourself among the hordes who question whether or not we are really in a recovery or still stuck in a recession or find yourself underemployed or out of work but wish you weren't, you may be questioning why things don't seem to be getting better with an improving jobless rate. Once upon a time the unemployment rate worked as a reliable economic indicator. It gave us the percentage of people out of work who wanted work, a basic measure of labor market health. According to the February 12 issue of the Washington Post, there are a number of reasons the unemployment rate no longer works as a barometer of labor market health and suggests that in that regard it has become irrelevant.
Unemployment rate no longer makes sense
It's hard to understand why the jobless rate doesn't seem to reflect the reality people are experiencing. The latest jobless rate of 6.5% should reflect a recovering job market, but while it looks good on paper it doesn't translate to jobs for the millions who need work.
Even Janet Yellen, the new Fed chairwoman said she was surprised by the two disappointing jobs reports in December and January and said, "we shouldn't focus only on the unemployment rate." It's not a problem that can be hidden under the rug. Main Street America recognizes the problem and the experts understand the problem. Yellen said, "A significant part of the decline in labor force participation is structural and not cyclical," and pointed to the fact that baby boomers are dropping from the labor force.
The real unemployment number
A detailed look at the government's data base shows that millions of people without jobs are consistently removed from the labor force just because the government defines them as not being in the labor force anymore. This may include retiring baby boomers, but that's only a fraction when you look at the complete picture.
The bigger picture can be found in the Bureau of Labor Statistics called "U-6" which includes "total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers." This is the way the jobless rate was determined back during the Great Depression and translates to include the long-term unemployed, the underemployed and the discouraged. That number is currently 12.7 percent. That's the real number of people feeling the financial pinch in their daily lives and another reason why the improving unemployment rate has become irrelevant.
People are not interested in an unemployment rate that looks good on paper. We desire an unemployment rate that gets most of us back to work. That means job creation, but according to Gallup, January job creation was still flat. While the government has pledged to create jobs, people are still waiting to see it happen.
What do you think needs to be done to create jobs?