Friday, May 2, 2014

The Unemployment Rate Fell for the Wrong Reason

BLS reported:
Total nonfarm payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Employment gains were widespread, led by job growth in professional and business services, retail trade, food services and drinking places, and construction.
Not a bad increase in employment per the payroll survey but when one looks at the household survey, reported employment fell. The employment to population rate stayed at 58.9%. So why did the unemployment rate drop so much? The labor force participation rate fell from 63.2% to 62.8% as noted later by the BLS:
The civilian labor force dropped by 806,000 in April, following an increase of 503,000 in March. The labor force participation rate fell by 0.4 percentage point to 62.8 percent in April. The participation rate has shown no clear trend in recent months and currently is the same as it was this past October. The employment-population ratio showed no change over the month (58.9 percent) and has changed little over the year.
We are far from full employment and we are not closing the gap quickly enough.

1 comment: said...

The continuing decline in labor force participation is simply depressing, no two ways about it.