Unemployment Rate is a Number

The new unemployment rate does not accurately reflect how the economy is really doing

By: Brandon Peng

March 11^th, 2014

About 4 years of constantly decreasing unemployment rate since the beginning of 2010, it shockingly returns back up to 6.7% this February. But that 0.1% should not matter.

Contrary to U.S’s economy slowing down by the revealed unemployment rate, it’s still stabilizing and progressing. According to the U.S Bureau of Labor Statistics, an agency of the federal government that calculate statistics of the U.S economy, we gained a back to the average rate since June; we have 175,000 new employments now.

 A huge section of those 175,000 new recruits belongs to the employment of 79,000 employees from professional and business service industry, with the average of 56,000 new employees for the past 12 months. The sections within that industry with the most noticeable gain are accounting and bookkeeping service with 16,000 new recruits, temporary help center with 24,000 new recruits, and service to building and dwelling with 11,000 new recruits.

Comparing the professional and business service industry’s statistics 2 months ago, it’s been steadily increasing from 19,000 new recruits in December and 36,000 new recruits in January to today. It holds accounting and bookkeeping as the industry that changed the most, from loss of 24,700 employees in December to now!

Another growing industry is the wholesale trade industry with a 15,000 gain with the average of 9,000 new employees. It constantly increases as well with 15,400 recruits in December and 13,900 recruits from January to now.

In contrast, the industry that lost the most is the information industry, fueling the unemployment rate by dropping 16,000 employees with its most volatile section: the motion pictures and sound recording industries. Out of that 16,000 dropped, 14,000 employees are from that section alone. The volatile section dropped 13,700 employees in December, gained 6,100 employees in January, and then plummeted again by 14,000 today.

With that industry being extremely volatile, there’s not much of a leading factor to unemployment rate not progressing. Keith Hall, a former chief Economist for the White House Council of Economic Advisers, stated that we’re progressing, but the rate increased because labor force increased while the labor force participation rate steady decreased.

In comparison to 12 months ago, labor force participation rate has been decreasing from 63.5% to 63% and it keeps on decreasing compared to January 2008 with 66.2%.

Explanation of the decreasing labor force participation has a strong relationship with the recent snowstorms engulfing average weekly work hours per employees. Average workweek of all employees regardless of industry in the U.S dropped as high as 0.6 hours per week.

Federal Reserve’s officials are well aware of the unemployment rate with the labor force participation. According to its February 2014 monetary policy report, it sees the unemployment rate simply stabilizing itself. It still sits comfortably on top of the Federal Open Market Committee participants' estimates of what is considered as long-run sustainable rate.

In February since the last Federal Open Market Committee, it obliged itself to purchase long term treasury securities at $35 million instead of $40 million and agency mortgage-backed securities at $30 million instead of $35 million. But based on the positive stable report recently, the Federal Reserved will continue to buy even less bonds assets of their bonds purchasing program.

The MarketWatch of Wall Street Journal predicted that the unemployment rate would keep decreasing to 6.5% two weeks ago. And now the future of March’s unemployment rate may be too predictable to becoming a long-run sustainable rate.