I’d have to say the drop in the unemployment rate is is better than if it was standing still, or rising. Nonetheless though you can attribute much of the improvement to people dropping out of looking for work. I’d have to hope that the rate is dropping even if higher than the measured rate, but even that isn’t supported by some estimates. In the graph below, notice how the estimated unemployment rate adjusted to account for people giving up the job search is not only higher than the official rate, but not declining as much either.
Via MR, FT Alphaville points to the work of economists at Nomura who have constructed an excellent graphic that highlights the real US unemployment rate. It stands at 10.3% compared to the official rate of 8.5%.
Much is being made out of the fact that the US unemployment rate has been falling in recent months. However, this conceals the fact that the declining rate is a statistical illusion. It excludes the large numbers who have stopped actively looking for work and have theoretically “left the labour force and therefore count as unemployed”.
The biggest concern is this
But what is striking about the broken line above isn’t where it now ends — at 10.3% — but rather the lack of any meaningful, sustained improvement for more than two years. This alternative measure has remained above 10% since September 2009, and aside from a bit of skittishness (some of which is down to uncaptured seasonality) has mostly just moved sideways.
Real American Unemployment Rate
Sun, 05 Feb 2012 01:14:00 GMT