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December Was a Good Month, but We’re Far From Fully Recovered

Last Friday, the Bureau of Labor Statistics released its December 2014 jobs report. Most media outlets have focused their reporting on the U-3 unemployment rate, which fell to 5.6 percent last month.

However, the U-3 unemployment rate is an imperfect measure of joblessness. In order to be counted as unemployed, a prospective worker must “have actively looked for work in the prior 4 weeks.” This means that if someone has been searching for work for a long period of time, but has become dissatisfied with their job prospects and hasn’t applied for any jobs over the previous month, he or she is no longer counted as “unemployed.”

Some have tried to correct for this bias by looking at labor force participation rates (LFPR); this is also misleading, mostly because labor force participation doesn’t distinguish between employment and unemployment. (A prospective worker is counted as being part of the labor force if he or she is either employed or unemployed and searching for work. This means that if 50 percent of a country’s citizens were employed and 30 percent were unemployed, its LFPR would be 80 percent; however, the LFPR would also be 80 percent if 75percent were employed and only 5 percent were unemployed. Obviously it’s important to distinguish between these two scenarios.)

CEPR and Nicolas Buffie / January 15, 2015