When ‘good’ news is bad news
The unemployment rate is down, and that’s bad news. Last week’s report from the Bureau of Labor Statistics showed the unemployment rate dropping to 6.7 percent in December, down from 7 percent in November, with only 74,000 new jobs created by the economy in the month.
The unemployment rate — “unemployed” defined as a person who does not have a job, but is actively looking for one — fell because thousands of the unemployed simply stopped looking. This brings the number down, but it’s evidence only that the economy is still sick.
The labor-participation rate dropped from a historically low level of 63 percent to 62.8 percent as the civilian labor force shrank by 347,000 — the 347,000 wouldbe workers who simply gave up looking in December. Between January and December, 762,000 Americans abandoned hope of finding work.
The picture gets even more depressing with the broader definition of unemployment. The broadest measure of unemployment stands at 13 percent, up from 12.7 percent in November. This definition includes not only the unemployed looking for jobs, but discouraged workers, those marginally attached to the workforce, as well those who are working part time because that’s the only work they can find. This broad measure is an accurate yardstick because it not only captures those who are seeking work, but everybody else who wants a job. In a healthy economy, the gaps between the various measures of unemployment should be far smaller. If Americans were optimistic about finding work, there wouldn’t be so many discouraged workers. The number wouldn’t be going up while the official unemployment rate is going down.
The continued failure to deal with the devastation of the long-term unemployed contributes to the sad-sack economy. The median length of unemployment has actually increased slightly to 17.1 weeks, even as the average length of time a job seeker stays unemployed has held steady at 37.1 weeks. The number of long-term unemployed has declined slightly, to just under 4 million, suggesting that more of these folk are dropping out. Congress will now push for expanding unemploymentcompensation benefits, but this is clearly a short-term fix, a spit-and-bailing wire fix that won’t stay fixed. The real problem is the lack of jobs. What the unemployed need is a hand, not a handout, and the economy can’t deliver that in a jungle of regulatory uncertainty.
It’s a toxic mix of rule by exceptions and waivers that prevents the sustained recovery and job growth that has pulled the country out of every recession since World War II.