The Bureau of Labor Statistics have released the unemployment figures for last month, and they’re slightly better than expected:
Nonfarm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 percent, the U.S. Bureau of Labor Statistics reported today. The average monthly job loss for May through July (-331,000) was about half the average decline for November through April (-645,000). In July, job losses continued in many of the major industry sectors.
BLS’ summary says that the unemployment rate was “little changed”, but that doesn’t really get at the weird thing about that number — it only changed a little, but that little bit was downward. Last month’s unemployment rate was 9.5%, meaning that it even as we lost 247,000 more jobs, the unemployment rate went down.
The economy loses jobs and unemployment goes down? How could that happen?
The answer, as Daniel Indiviglio explains at The Atlantic, is that the unemployment numbers don’t include people who have been looking for work for so long that they’ve given up and dropped out of the labor force:
As a recession drags on for this long, and people are unable to find jobs, they begin leaving the workforce. They become discouraged regarding job prospects. BLS offers an unemployment rate that includes these discouraged workers. In June 2009, that was 10.1%. For July, it was 10.2%.
Given this change in unemployment including discouraged workers, I think it’s pretty clear that the 0.1% decrease in the reported unemployment rate can be misleading. In reality, those who would like a job but don’t have one increased by 0.1% up to 10.2%.
At FiveThirtyEight, stats savant Nate Silver argues that, while the numbers aren’t good, they do imply that the worst is over:
These numbers do not point toward a “good” economy. Some of them, like the decline in the unemployment rate, are even a bit misleading, since some of that has occurred because a lot of dispirited job seekers have given up on looking for work.
But they do speak unambiguously toward an economy which has almost certainly bottomed out and has probably begun to improve. It is more likely to be a slow recovery than a fast one, especially in employment, but this is arguably the best news that Obama has had since taking office.
Economist and former Labor Secretary Robert Reich, however, takes a dimmer view:
The overall economy continues to contract but more slowly than before. Consumers are not buying, exports are still dropping, and business investment is still in the doldrums, so the only clear reason is that the stimulus is beginning to kick in. Yet — here’s another important thing to watch — job losses continue to outpace that contraction. In other words, employers are using this downdraft to lay off more workers, proportionately, than they have since the Great Depression…
So let’s be grateful that the economy is getting worse more slowly than it was. But don’t be lured into thinking we’re ever going back to where we were. Most of the jobs that have been lost are never coming back. New ones will replace some of them, eventually, but hardly all of them. The structure of the American economy is changing. We will emerge from all this with an economy that looks strikingly different from the one we had in 2007.