NCPA - National Center for Policy Analysis

Unemployment Isn't Going Anywhere Fast

July 16, 2013

The June unemployment report was released recently with little fanfare. The lack of inspired commentary isn't surprising. The new unemployment numbers are largely unchanged, reflecting yet another month of just enough economic activity to keep the country humming above negative growth levels but not enough to be considered a robust recovery. But the fact that we keep getting similar, limp labor market reports is interesting in and of itself, says Anthony Randazzo, director of economic research at the Reason Foundation.

Consider the headline numbers:

  • Official unemployment (U3) was unchanged at 7.6 percent from May to June.
  • However, the more accurate measure of unemployment (U6) that includes workers who have recently been dropped from the labor force actually increased dramatically from 13.8 percent to 14.3 percent. In relative terms, that is a movement not seen in many, many months.

This increase is an indication that the jobs created and filled over the past few months are not the type of full-time jobs that are going to get the unemployed back on their feet.

  • Some headlines pointed to the 195,000 jobs added as a sign of "steady" growth, but there can be no real growth as long as the U6 unemployment number remains high.
  • More revealing than the number of nominal jobs added in June is the fact that the number of discouraged workers in June was 1 million workers, which is up 20 percent from last June.

Sharper reflections of where the labor market is trending remained unexciting, speaking to the depth of how bad job prospects are for the unemployed. Both the labor force participation rate and the employment population ratio technically improved by a tenth of a percentage point in June compared to May. But Bureau of Labor Statistics data has a pretty high margin of error and a 0.1 percentage point shift is statistically insignificant. In practical terms the numbers remain the same as the last few months.

If growth continues in sectors like health care and IT there may very well be a positive turn for unemployment. But if hopes for manufacturing jobs to coming roaring back continue to hold the labor market to the ground, and human capital doesn't adapt to the future, then our present new normal for unemployment may no longer appear so "new" anymore.

Source: Anthony Randazzo, "Considering the Not-So-New Normal for Unemployment," Reason Foundation, July 11, 2013.


Browse more articles on Economic Issues