The economy added 166,000 jobs last month. Is that a lot, or a little? If the economy added jobs, why did the unemployment rate stay the same – shouldn’t it have gone down? Are these new employees mostly burger flippers? Is it true that when people lose their unemployment benefits, they’re no longer counted as unemployed? Have a lot of people gotten discouraged and given up looking for work? What kind of people are most likely to find work?
I do a lot of interviews on radio call-in shows. The most common phone call goes something like this: “Why isn’t there something out there that explains what’s going on in the economy in clear English?” To the many talk radio callers, cameramen who’ve helped me do satellite hook-ups with TV shows, and waiters who’ve approached me to follow-up on one of my speeches, I say: This column’s for you.
There are 146 million of us working here in America. That number has never been higher. Compared to that there are only 7 million people unemployed. Rough 79 million people are not in the labor force at all. This includes people who are underage, retired, disabled, ne’er do well scions of great fortunes, and people who have simply given up looking for work. The last group is officially referred to as ‘discouraged workers’. At 320,000 people, it is an infinitesimally small proportion of the total labor pool – less than third of a percent. Contrary to widespread assertions in the blogosphere (and the editorial page of the New York Times), it has not been rising. In fact, over the past 4 years, people have been rushing into the job market, not out of it.
Economists generally consider any unemployment rate under 5% to be ‘full employment’, which means that even when things are great, there’s still a delay between the time people leave one job and take another. The current unemployment rate is 4.7%. This rate is very low, but not as low as during the tech boom of the late 1990s. However, the jobs of that era were far more likely to be paid for by investors who were waiting for a company to show its first profit, than now, where the jobs growth is associated with high profits.