Why April’s unemployment report is worse than it looks

Yesterday’s announcement that North Carolina’s unemployment rate had dropped to 8.9 percent last month was met with considerable acclamation in a number of media reports today. Unfortunately, much of this positive commentary was misplaced—despite demonstrating some superficial improvement, the new jobs report is far worse than it first looks.

In fact, the dip in the state’s unemployment rate is due almost entirely to a contracting workforce, rather than genuine new job creation. Specifically, almost 20,000 workers dropped out of the labor force the pool of prime age workers who either have a job or want one—last month, including 15,000 jobless workers who were unable to find employment and gave up searching.

Given that the labor force contracted by 20,000 and the total number of employed workers also dropped by 4,000 at the same time, it appears that the 14,000 drop in the number of unemployed workers is largely the result of jobless workers becoming discouraged—giving up on looking for work and dropping out of the labor force altogether.

As a result of these changes, the labor force—is now at the lowest level since July 2012, erasing almost 9 months worth of gains. Even more troubling, the total number of employed people in North Carolina also dropped to the lowest levels since October 2012, suggesting that North Carolina’s economy is continuing to struggle in generating long-term sustainable job creation.

In other words, unemployed workers moved out of the labor force altogether, rather than moving into new jobs.

As a result, the unemployment rate dropped due to a mathematical quirk in how the Bureau of Labor Statistics calculates the rate.  The jobless rate is determined by dividing the number of unemployed workers who are looking for work by the number of workers in the labor force, so when the labor force contracted, the unemployment rate naturally went down as well, even though the labor market did not generate any employment growth last month.

That’s why April’s unemployment report is worse than it looks.

5 Comments

  1. marilynne speed

    May 18, 2013 at 9:15 pm

    This is absolutely correct. I am and have been unemployed for over 1 year. My benefits have been exhausted and for that reason I cannot file a claim. The drop in unemployment claims is NOT due to a return to work, it is because while in need the benefits were stripped. The numbers are false. I am disgusted with the legislators of this state. They are solely concerned about themselves and thier trust funds. It is repugnant.

  2. Doug

    May 20, 2013 at 1:36 pm

    Given the turmoil and promised oppressive policies by the folks in Washington, it is not surprising that employers are more or less stocking up on workers they can get rid of pretty quickly. With a looming recession, Obamacare on the way, and increasing regulations it is really the only way they can go. Once the economy goes south later this year these part time and contract workers can be let go much cheaper than actual employees. You leftists made the bed, now you gotta live with your big government policies.

  3. david esmay

    May 20, 2013 at 2:03 pm

    Layer upon layer of conservatroll stupidity from Dougey Boo Boo. Google how much did the government expand under Bush. Don’t bother, I’ll tell you, 115%. Doug, you have never backed up a single one of your wing-nut platitudes or talking points with any data from a reputable source.

  4. wncgirl

    May 20, 2013 at 2:59 pm

    Why do you allow Dougie on this site… I try to post on civitas or locke and my comments are usually taken down the same day— obviously art pope does not value public input anymore than his conservative lackeys in the GA

  5. Doug

    May 21, 2013 at 11:06 am

    For some reason I cannot get on there either. Not sure why. But if you do not like an actual discussion, why are you slamming Civitas while requesting this site squash any thoughtful debate? More liberal hypocracy I guess. I for one would welcome them publishing the leftist comments, it would be even more fun to continue to show the Law of Ignorance of Liberalism over there too.