Friday, March 9, 2012

Why a Rise in the Unemployment Rate Could Mean a Real Recovery is in Progress

Ezra Klein at the Wonkblog posted an article before today's national jobs numbers for February were released by the Bureau of Labor Statistics.  In it he explains why a rise in the unemployment rate might actually be a better indication of economic recovery than a drop.
Imagine two jobs reports today: In one, we add 200,000 jobs, and unemployment falls to 8.2 percent. In another, we add 200,000 jobs and unemployment rises to 8.4 percent. The first jobs report will probably result in better headlines for the Obama administration. But it's the second jobs report that's more indicative of real recovery.
Seem counter-intuitive?  Read the article.  The essential take away is that as a real recovery is proceeding, more people will be streaming back into the labor market who have dropped out, thus making it harder to reduce the unemployment rate, although many more people will in fact be working.

Klein was almost prescient.  The job numbers came out later in the morning.  The U.S. economy added 227,000 new jobs, but the unemployment rate stayed constant at 8.3%.  This is the third straight month of job creation north of 200,000.

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