Unemployment Rate Drops to 9% — or did it?

The unemployment rate fell four-tenths of one percent to 9.0% in January, according the U.S. Bureau of Labor Statistics’s Employment Situation Report.  While the decline in unemployement should be good news for American workers and policymakers, the drop was not due a sharp increase in hiring.  In fact, only 36,000 jobs were created during the month, according to the report.

 

What led to the decline in unemployment rate was the fact that the civilian labor force declined by one-half million potential workers.  In other words, workers are giving up and leaving the workforce, which makes the unemployment rate appear to decline.  This means that if the economy roars back in the future, these workers may reenter the workforce, thereby keeping the unemployment rate stuck on high.  

 

The bottom line is that the job’s market is still struggling in the U.S., despite the apparent oppimistic report. 

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