It's Time To Dump The Unemployment Rate: We Need A Better Measure That More Accurately Depicts Today's Job Market

[SirLinksALot]

SOURCE: INVESTORS BUSINESS DAILY

URL: http://www.investors.com/politics/editorials/its-time-to-dump-the-unemployment-rate/


The July jobs report was a good one, and the unemployment rate held steady at 4.9%, which in the past would have been sure signs of a robust economy. So why is the country in such a bad mood?

An unemployment rate below 5% is a relatively rare thing. Only twice before in the past 40 years has it dropped that low -- once in the late 1990s during that economic boom, and again briefly in 2006-2007.

Yet unlike before, there is little joy in Mudville today. Instead of confidence and optimism, there is only malaise.

Back in 1997, for example, the Consumer Confidence Index was up to 130. By the end of 1998, it topped 140. (The base year used for the index is "Morning in America" 1984, when it stood at 100.)

In 2006, when the unemployment rate again dropped below 5%, the Confidence Index was in the 110 range.

Today, despite the fact that unemployment has been below 5% in five of the past seven months, the index is just 97.3.



In the late 1990s, nearly two-thirds of the public thought the country was headed in the right direction, according to an ongoing Gallup survey. Today, just 17% say the country is headed in the right direction.

Signs of gloom abound. The latest IBD/TIPP poll finds that more than a third of adults (37%) think the country is in a recession. Less than half (48%) say that the economy is improving, while 49% say it's not. More than half (55%) are dissatisfied with federal economic policies.

And in almost a third of households (31%), there is either someone who is out of work or worried about losing a job.

What is going on here? Put simply, what's happened is that the official unemployment number has grown increasingly useless as a reliable economic indicator, for the simple reason that millions of people have simply quit looking for a job. Since the unemployment rate is based only on those who are actively looking for work, the more people who drop out of the labor force, the lower the unemployment rate becomes.

CLICK ABOVE LINK FOR THE REST...