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The Bad News Behind The Unemployment Numbers

This article is more than 9 years old.

There is a lot of good news in today’s unemployment report from the Bureau of Labor Statistics.  But if you compare those unemployment statistics with pre-recessions numbers, the picture is not so rosy.

First the positives: The official October jobless rate fell to 5.8% from 5.9% in November, which was a sharp decline from the 7.2% rate a year ago. Employers added an estimated 214,000 jobs in October; since the start of the year they have added an average of 220,000 jobs each month, a pace that the economy hasn’t seen since nearly a decade ago. Even the so-called “real unemployment rate,” known inside the BLS as U6, fell sharply in October to 11.5% from 11.8% in September. That rate was 13.7% a year ago. U6 counts not just the people who reported looking for work in the last four weeks, which is what the official unemployment rate captures, but those who are working part-time when they wish they had a full-time job, and those who want to work but are too discouraged to look.

Now the dark clouds. The most obvious disappointment is wages. Hourly average earnings hardly budged in October, moving up only 0.1% after stagnating in September. For the year, wages have only climbed 2%, barely ahead of inflation. More importantly, if you adjust wages for inflation, they have risen from $21.11 in October 2007 to $21.59, in 2007 dollars, last month, a measly increase of just 2% in seven years.

One of the most worrying numbers, says Harry Holzer, public policy professor at Georgetown and a chief economist at the Labor Department during the Clinton administration, is the so-called labor force participation rate, the percent of the overall population that is participating in the labor market in some way, either looking for work in the past four weeks or working. In October 2007 that number was 65.8%. It has steadily declined since and hasn’t regained ground during the recovery. It’s now at 62.8% and only half the decline is a result of more retirees. That means that some 3.8 million non-retired Americans have simply abandoned working. If they change their minds and want to come back, it can be extremely difficult. Says Holzer, “We know two things about people who have been out of work for a long time. A, they’re stigmatized in the eyes of employers, and, B, their skills are probably rusty, especially in fields where skills keep changing.”

Another important number is the percent of the labor force who are working part-time when they would prefer to be working full-time. Just 2.8% of the population fell into that category back in October 2007. That number has climbed to 4.5%.

Yet another depressing statistic: the percentage of unemployed people who have looked for a job in the past four weeks but who are still jobless after six months or more. That number is now at 31%. Pre-recession it was just 18%. “That chunk of people will have a real hard time finding something,” says Holzer.