Jobless claims dropped last month sending the unemployment rate down a notch, but it’s too early to get excited that the dampened U.S. economy is on the mend.
The unemployment rate fell from 7.9 percent to 7.7 percent in November, the U.S. Department of Labor reported last week. The drop was its lowest level in four years. It has dropped more quickly in the past year than in any one-year period since 1995.
It sounds like a shot of good news to our beleagured economy. However, it should be followed with a heavy dose of reality.
The unemployment number the U.S. Department of Labor uses doesn’t include the number of discouraged workers – those who just quit looking for jobs.
When those jobless numbers are included, actual unemployment looks to be closer to 15.6 percent, and some economists pin the number of actual unemployment at closer to 22 percent.
The rapid drop in the jobless rate is aided by a large number of Americans who are sitting on the sidelines rather than joining the workforce.
The labor participation rate, a measure of the share of working age people employed or unemployed and seeking work remains at near record lows since women entered the work force.
The participation rate, at 63.6 percent, is now lower than where it was when the Great Recession began in 2007.
The current percent unemployment rate simply measures the number of unemployed people actively looking for work. It doesn’t tell the complete story.
Yes, the unemployment numbers dropped last month, but that may be because more of the unemployed gave up searching for jobs.