Why The Unemployment Rate Went Up

May 7, 2011 9:55 am

When the job numbers came out recently, hiring went up, but so did unemployment. How did this happen?

We have written about how the unemployment rate is measured.. The summary of the answer is below:

“Despite the warm and fuzzy reaction to the surprisingly good jobs number, there was another very important number that seemed to suggest the economy is far from healed: The unemployment rate. The jobless figure rose to 9.0% in April, from 8.8% the month before. And while some economists were expecting the number to jump even while the economic picked up, April’s jump was worse than expected. Here’s why:

Month after month economists have been expecting the unemployment rate to rise, even at the same time predicting the economy would improve. How is that? Well, the unemployment rate tracks the number of people who are looking for work, not the number of people who are out of work. If you are out of work and not looking, well then you are basically invisible to the government (that’s certainly a problem, but another story). So as the economy improves, more people get encouraged they will find a job and more people look for work. Presto: The unemployment rate jumps. Good sign, right?

It would be if that was what happened in April, which it was not. Actually, the number of people in the labor force not looking for a job actually rose. At the same time, the number of people who want a job and can’t get one rose by more than 200,000. So there is no easy way to explain away the unemployment rate, other than to say, at least by this measure, the jobs market was worse in April.”

Read more: http://curiouscapitalist.blogs.time.com/2011/05/06/when-do-good-jobs-numbers-equal-a-good-economy/#ixzz1LeujLoz2

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