WASHINGTON — The monthly unemployment rate holds almost mythical importance as a barometer for the health of the U.S. economy. But what if it’s not telling us what we thought?
Economists still view the monthly jobless rate – 7.2 percent in September – as an important guidepost, but many question whether it tells the whole story in today’s impaired labor market..
“I think it is exaggerating improvement,” said Scott Anderson, the chief economist for San Francisco-based Bank of the West. “It’s a muddy picture. No doubt about it.”
He’s not alone.
“Things kind of fell off a cliff in 2008, and then made very little improvement since then . . . except the unemployment numbers are telling this other story,” said Heidi Shierholz, a labor economist at the Economic Policy Institute, a left-leaning policy research organization.
The problem is that the Federal Reserve has held up the unemployment rate as a must-read, calling it the key sign of when the Fed will take its foot off the pedal of unconventional stimulus for the U.S. economy. Specifically, Chairman Ben Bernanke has said a 7 percent unemployment rate is a good marker for ending the support. In the latest report, for September, the jobless rate was just two hairs off that.
Yet while unemployment indicators seem to be improving, the data on employment itself is much more flat. Think of it as two lines, one sloping down on a decline and the other largely flat and straight. It’s why many are wary of the monthly unemployment rate.
