Low unemployment numbers can be deceiving. When the unemployment rate declines, it does not necessarily mean that more people found jobs. Instead the number can reflect people dropped off the official unemployment rolls and out of the workforce. How is that “good news?”
In the county where I live, the number of unemployed dropped from 6800 to 5600 in November, according to county workforce director in a recent news story in our weekly paper, The Post.
Yay ! 1200 people no longer unemployed? A 17.6 % drop- in unemployment?
Not so fast. “…the number of people employed in Medina County remained at approximately 91,700 over that same period.”
People who run out of benefits and quit actively seeking work drop off the list of unemployed and are also no longer counted as part of the workforce.
The estimated workforce in Medina County dropped from 98,500 in July to 97,300 in November.
1200 in all.
The 1200 people that dropped from the unemployment rolls- would seem to be the 1200 people who also dropped out of the workforce between July and November.
So that 1200 person drop in unemployment is not good news- it doesn’t mean that 1200 people now have found good paying jobs.
In reality, it means that those 1200 people have run out of benefits and are not counted by the officials as unemployed nor as part of the county workforce.
That’s why we don’t report on changes in the unemployment rate- the changes are PRESUMED to mean that the employment situation got better. The reality is that those people are now officially invisible, as they aren’t even counted in the workforce, nor are they counted as unemployed. But they are unemployed.
When a change in an indicator can mean more than one thing, it is questionable to use it as an indicator. Does it mean this? Does it mean that?
Ambiguous indicators are worse than worthless- they are deceptive. Changes in the unemployment rate are ambiguous indicators- they could mean an uptick in hiring, or they could mean people have run out of benefits and are no longer being counted as part of the workforce.
In the case of unemployment statistics, what appears to be good news (a drop in the unemployment rate) is not always good news (the people are just no longer counted as unemployed nor as part of the workforce).
That’s why we don’t post about unemployment. And when anyone does, we suggest you take it with a grain of salt.