The big story this morning is the unemployment rate dropping to 8.6 percent last month. According to the headlines the “unexpected” drop was caused by the private sector adding 120,000 jobs and puts the rate at the lowest level since March 2009. We are also told this is a “further sign that the uneven recovery has regained some vigor.”
Other than the rate being at its lowest in two-and-half years, there isn’t a word of truth in any of it. It shouldn’t have been unexpected, that’s not why the rate went down and it’s not a good sign for the economy. In fact, a good sign for the economy will be when the unemployment rate spikes unexpectedly.
For the reality of the story let’s go to Fox News (and believe me, that is not a sentence I ever expected to write):
The unemployment rate fell to 8.6 percent in November, a number that offers the Obama administration a rare piece of good economic news — but also masks a startling shift in the job market.
While 120,000 net new jobs were added, that’s only half the story. The other half is that the rate dropped because 315,000 people stopped looking for work. If you have fewer people in the labor pool then it takes less of an increase in new jobs to move the needle.
The moment when we will know the economy is actually improving is when the unemployment rate suddenly increases. That will mean a lot of people think times are getting better and are getting back into the job market.
And about the unexpectedness of that drop … it was unexpected because economists had thought the rate would stay around 9 percent. First, isn’t it about time we stopped giving so much weight to what economists say? Second, the economists don’t seem to be looking at the facts that are driving so many people to feel hopeless. Here are two they might want to keep in mind: