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Go Beyond The Headlines: Unemployment Data

2008
03.12

The Unemployment Rate fell to 4.8 percent in February.

This is 0.1% lower than from January and that’s confusing to a lot of people; it’s been highly publicized that U.S. companies shed 63,000 jobs last month.

Americans are losing jobs at the same time that the Unemployment Rate is falling. Seem strange?

Well, it’s possible because the Unemployment Rate measures workers unemployed versus workers in the workforce.

The “jobs number”, by contrast, measures active workers collecting actual paychecks.

So, when the government reported that Unemployment Rates fell in February, it happened because the “workforce” figure used to calculate the unemployment was 644,000 less than the workforce figure from January.

644,000 people have left the workforce entirely. This not only includes those retiring, but the government specifically excludes Americans from the workforce that:

  1. Hadn’t looked for a job in the last 4 weeks, or
  2. Felt “discouraged” by their prospects and didn’t look for a job at all

And that’s why the Unemployment Rate fell in February even as companies were laying off workers — the total workforce size was reduced by more than the total number of jobs lost.

On paper, it looks like the jobs market may be improving but after a closer look, the opposite may be true.

Similar to mortgage-related stories, there is always more to know than just the headline — you have to dig deeper to find out what the news really means and how it applies to you.

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