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Tags: WSJ | Unemployment | rate | jobs

WSJ: Unemployment Really at 8.9% if Labor Force Dropouts Counted

Tuesday, 14 February 2012 08:04 AM EST

The country's unemployment should stand at 8.9 percent instead of its current level of 8.3 percent if those who dropped out of the labor force were accurately taken into account, the Wall Street Journal reports.

The unemployment is calculated by taking the number of unemployed people and dividing it by the number of people in the labor force.

However, the calculation doesn't include those who have quit looking for work.

Count them back in and January's unemployment rate stands at 8.9 percent instead of January's 8.3 percent figure, as more people are out of work than the numbers would suggest.

One problem with the U.S. labor market is that aging Baby Boomers are leaving the work force to retire, while younger workers aren't entering the labor force at all.

"While some of the decline in the labor force has been through discouraged workers giving up, a large portion of it has come from demographic factors that were in place before the recession," the Wall Street Journal reports.

The Labor Department does attempt to cut through demographics and identify discouraged workers.

It does so by asking those who aren't in the labor force if they would take a job if one was offered.

"In January, there were roughly 2.8 million people in this category," the Wall Street Journal reports.

Add most of them (not all because even in good times not all would jump back into the job pool) and the unemployment rates stands at 8.9 percent, the Journal reports.

Federal Reserve Chairman Ben Bernanke himself has said that despite declines in the official unemployment rate, the overall labor market remains weak.

"It is very important to look not just at the unemployment rate," Bernanke told a congressional hearing, Bloomberg reports.

"The 8.3 percent no doubt understates the weakness of the labor market in some broad sense."

Some people are leaving the workforce because they can’t find jobs, and others are taking part-time jobs because they can’t find full- time employment, Bernanke adds.

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Tuesday, 14 February 2012 08:04 AM
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