Don't be fooled into thinking today's unemployment figure represents good news. Sure, the official unemployment rate dropped from 10 percent to 9.7 percent. However, as Reuters reports, that occurred because "[t]he number of 'discouraged job seekers' rose to 1.1 million in January from 734,000 a year ago."
"Discouraged job seekers" are those who have stopped looking for work altogether. And since those people aren’t factored into the calculation of the unemployment rate, an increase in discouraged job seekers has the effect of driving the unemployment rate down. In other words, the only reason the unemployment rate dropped is because more and more people have decided it's not worth it to even look for a job. We're moving backward, not forward.
Today's report comes about a week after President Obama announced in his State of the Union speech that "jobs” will be the major focus of his administration over the next year. So, clearly, the president understands the urgency of the unemployment problem.
What he doesn't understand, as I argued in my commentary on Monday, is how to solve it.
"Discouraged job seekers" are those who have stopped looking for work altogether. And since those people aren’t factored into the calculation of the unemployment rate, an increase in discouraged job seekers has the effect of driving the unemployment rate down. In other words, the only reason the unemployment rate dropped is because more and more people have decided it's not worth it to even look for a job. We're moving backward, not forward.
Today's report comes about a week after President Obama announced in his State of the Union speech that "jobs” will be the major focus of his administration over the next year. So, clearly, the president understands the urgency of the unemployment problem.
What he doesn't understand, as I argued in my commentary on Monday, is how to solve it.
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1 comments:
A small drop in the unemployment rate means nothing, even in a crisis you get pent-up demand in some sectors resulting small spikes. The problem is that the GDP is highly overvalued as it contains the crisis-driven overspending which is not a sign of health rather the opposite! And with the variable mortgages being reset later this year that will all fall like a rock …
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