On Friday, December 7, 2012 the Department of Labor announced that the economy had created 146,000 jobs. They announced that the unemployment rate dropped to 7.7%, the lowest since 2008.
Unemployment Declined for the “Wrong” Reason
In the midst of headlines and hoopla of lower unemployment rates, a phrase appeared in almost every story. Let me share the phrase from several different sources (You can read the entire article by following the link):
- Bureau of Labor Statistics: “The remaining 1.5 million persons marginally attached to the labor force in November had not searched for work in the 4 weeks preceding the survey”
- CNN Money: “it fell due mainly to workers dropping out of the labor force.”
- NY Times: “a significant number of workers remain discouraged, prompting them to drop out of the job hunt”
- Reuters: “was due to a decrease in the size of the labor force, a suggestion that frustrated Americans were giving up the hunt for work.”
- Christian Science Monitor: “The decline in unemployment, meanwhile, came because of what many economists call the "wrong" reason – people dropping out of the labor force. ”
Reasons for “Discouraged” and “Withdrawn” Job Seekers
The story behind the story, the unemployment rate did not fall because the economy generated so many jobs. Most were surprised that Super storm Sandy did not slow the job market as much as economists predicted. None of the stories, that I read, about the unemployment rate mentioned the 18,000 people laid off by the closure of Hostess Bakery, or the 14,000 laid off by JP Chase Bank, or the other closures that occurred in November,
People gave up and stopped looking for several reasons. They:
- Believe the want ads and employment boards accurately reflect the job market
- Doubt the president and congress can avoid taking us all off the economic cliff
- Focus on family, household, and other activities instead of hunting for a job
- Fail to impress hiring authorities before they need someone
Friday we will discuss predictions about the upcoming elimination unemployment payments
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