U.S. unemployment rate : improving or not?

Here and there we can hear that the American unemployment rate is decreasing and investors in Europe want to believe in an improvement coming from the West.

Well, I think it’s time to check out the figures. And we should do it carefully. In times of American elections, the unemployment rate is one of the most important indicators of the re-election chances for the current President.

And it’s not easy to understand the job market situation in Uncle Sam’s country.

In a recent interview with CBS “60 minutes” program, President Obama was cautious about the situation of his country. However, Reuters announced that “the U.S. jobs picture has improved in recent weeks, with the national unemployment rate falling to 8.6 percent from 9 percent” (Obama says economic fix could take years, Reuters 9/12/2011). Although there is nothing outstanding in these figures, an improvement in the current situation is more than welcome. The American government even reported last week that “the number of Americans filing new claims for unemployment benefits dropped to a nine-month low last week”. Well done! Of course Reuters noticed that a normal rate in the United States would be between 4 and 5 percent. But an improvement is an improvement. No one could deny it. Some experts are already talking about “recovery” and everyone seems surprised by such a good result. According to Reuters (Jobless claims at 9-month low as recovery quickens, Reuters 8/12/2011, ),”Initial claims for state unemployment benefits fell 23,000 to 381,000, the Labor Department said, the lowest since late February. Economists had expected a smaller fall to 395,000”. Reuters has been taken up by the very serious New York Times. And that’s where I am surprised.

Actually, one week earlier the NYT published an article titled “Signs of Hope in Jobs Report; Unemployment Drops to 8.6%” (NY Times, 2/12/2011). The journalist was wary but wanted apparently to mirror the general optimism. But in the article we learnt many things darkening the general positive conclusion:

– First, the journalist explained that the unemployment rate fell because more American got jobs but also because workers dropped out of the labour force. The question is: what percentage of the rate decrease do the new hired people represent? Or at least, just to get some ideas, we would like to know if the number of new hired people is higher that the number of dropouts?

Well according to the figures highlighted by this article, not exactly. 120.000 persons got a job in November whereas 315.000 people quit their position of job seekers for other reasons than finding a job. “That left the share of Americans actively participating in the work force at a historically depressed 64 percent, down from 64.2 percent in October”.

– Secondly, if we just focus on the existing unoccupied labour force, we count more than 13 million people looking for jobs for an “all-time high” average of 40.9 weeks (or more than 10 months).   

– Thridly and that’s really interesting, people got jobs but for a smaller salary. “Average hourly earnings fell 0.1 percent in November, and […] the share of national income going to labor was at an all-time low last quarter”.

Let’s summarize a bit. The unemployment rate has been reduced of  0,4% last month, because 120.000 people got jobs and 315.000 people didn’t but were not counted as official job-seekers anymore. The rest are still looking for a job and spend even more time on it. And the share of the national income going to worker reached an historical low level. Do you understand my perplexity?  

As I said, an improvement is an improvement and we should celebrate… unless these 8,6% are not the picture of the reality.



Jobless claims at 9-month low as recovery quickens, Reuters 8/12/2011



Obama says economic fix could take years, Reuters 9/12/2011



Signs of Hope in Jobs Report; Unemployment Drops to 8.6%, NY Times 2/12/2011


  1. missdisplaced said:

    I must be one of the lucky ones because I actually got another full time job that pays close to what I made back in 2008 when I got laid off. I’m hoping that is the case for others, but I doubt it.

    I think the drop is seasonal due to holiday jobs mostly. Also unemployment benefit money is running out for many, and then you are not counted.

    • Thank you very much for the precisions. And congratulations for your new job. Regardless to what’s happening in the world and to the pessimism of this post, I wish you all the best for the future.

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