Economic Charts

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Friday, March 4, 2011

Unemployment Rate

The Unemployment rate for February 2011 was released and on the surface looked good coming in at a U3 rate of 8.9%.  U3 is calculated by dividing the unemployed by the labor force.  This is very simple, but doesn't take into account the number that have dropped out of the labor force.  As you can see below U6 which takes into account Marginally attached, Part Time for Economic Reasons and such is actually at 16.8%.  Taking into account persons that want a job now but cannot find one and you get real unemployment at 21%.
Now both U3 and U6 still don't include the number of persons that dropped out of the participation rate so we take a look at some BLS (Bureau of Labor Statistics) for additional historical data.  The first 2 graphs show The civilian labor force level, which has been sideways to declining as the population has been increasing.  

Then we take a look at the number of persons that are not in the labor force, which has been increasing (so more and more people are out of the labor force).   Compare that with the civilian labor force participation rate which has been declining in the past decade (in percentage) especially since 2008.

Finally, we look at the unemployment level in the following graph which shows a decline in unemployment (due to persons whom have dropped out of participation in employment).  The last graph shows a slight decline in the number of persons unemployed for 27 weeks and over (decline after a spike), need more data to see what the longer term trend is.

To sum up I don't see things improving in the numbers when so many are falling out of the participation rate of unemployment. We need to see real growth in participation rate and a decrease in the number of persons who want a job now, but cannot get one.

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