The Labor department reports that our official unemployment rate has risen to 9.9% and the official “underemployment” rate is now at 17.1%.
Not to worry though, because according to some, this is a very positive sign of recovery.
US News says that “a rising unemployment rate is actually one of the best signs yet that the economy is bouncing back.” Yes, you read that right.
Here’s their reasoning:
It sounds dreadful. After drifting down consistently since last fall, the unemployment rate has suddenly shot up again, from 9.7 percent in March to 9.9 percent in April. But don’t despair: A rising unemployment rate is actually one of the best signs yet that the economy is bouncing back.
The unemployment rate rose for the right reason. Instead of shedding jobs, employers added 290,000 jobs in April, the strongest showing since 2007. The reason the unemployment rate went up is that a lot more people are suddenly looking for work. The government said that the labor force swelled by 805,000 people in April. That’s more than three times the number of new jobs, so the proportion of people looking for a job but unable to find one went up. Still, that big increase in the labor force marks an important shift in sentiment among people on the fringes of the economy.
One of the most worrisome trends throughout the recession and early stages of the recovery has been the declining size of the U.S. labor force itself. By late last year, so many unemployed people had given up looking for a job that the labor force participation rate–the percent of adults who either have a job or are looking for one–had fallen to a 25-year low. Others who might have entered the labor force–recent graduates, stay-at-home spouses–decided not to.
About 195,000 formerly discouraged workers have now reentered the labor force, presumably because they think the chances of finding a job are getting better. That’s a tiny fraction of the 6.7 million Americans who count as the long-term unemployed, but it’s still a break in the gloom.
Call us crazy, but we think that formerly “discouraged” workers were discouraged because there are no jobs to be had. In fact, 80% of those who lost their jobs last summer still can’t find work today!
And the reason for them reentering the workforce is not because they think the chances of finding a job are getting better, but because they are broke – they’ve used up their savings, taken out what they can from their retirement accounts, maxed out their credit cards, and their unemployment benefits have run out. We can’t think of a better motivator to start looking for a job than this.
The fact that these formerly “discouraged” workers are now being counted is an indicator of the severity of the problem. This is not positive news.
Nice try, though, US News.
A quick note on the 290,000 jobs added by “employers” last month: According to this report, 66,000 of those jobs were census workers, which means in about 6 months those jobs will be gone, and another 188,000 jobs we related to the birth/death statistic. Thus, we added only 36,000 jobs, significantly less than the government reports and not as bright a number as US News, et. al. make it out to be.