Friday, February 5, 2010
The Department of Labor announced today that the unemployment rate is now at 9.7%, down from 10% last month. But that drop is deceptive as there was a 20,000 job loss in January (and December's losses were adjusted download by a significant amount). So what's going on? Probably more people dropping out of the job market (the 16.5% underemployment rate is a related phenomenon), making the overall job situation look better than it is. This will have another counter-intuitive effect once hiring begins in earnest. Initially, the unemployment rate will likely increase for a while as people who dropped out starting looking for work again. Yet another reminder that one number--especially the unemployment rate--only tells part of the story.