Sunday, May 9, 2010

Unemployment rate is up, and that's good news

By Dr. Jason White
Family Investment Center

The national unemployment rate rose from 9.7% to 9.9%, and I call it "good news" - why?

The unemployment rate is calculated by the Bureau of Labor Statistics by dividing the unemployed by the civilian labor force. Both the numerator and the denominator of this ratio rose - so what does that mean?

It means that the number of people finding jobs was up - excellent! But it also means that a large number of workers who had previously classified themselves as "discouraged workers" re-entered the labor force and began looking for jobs.

So, the labor report is positive for these two reasons: more people finding jobs, and more discouraged workers returning to look for jobs. The reason the unemployment rate rose is because of this large influx of discouraged workers re-entering the ranks of the unemployed.

The Moral: We must look beyond the headline number - what appears as a negative, a rising unemployment rate, is actually a positive as labor grows more confident in their ability to find work.

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