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Meaningless Unemployment Rate Drops to 5.4%

Posted by Steve Markowitz on May 12, 2015

Last week the US Department of Labor released April’s unemployment figures that indicated the US economy added 223,000 jobs, decreasing the unemployment rate a notch to 5.4%.  This would be good news if the Labor Department’s figures realistically represented the US employment situation.  Unfortunately, it does not.

The Labor Department’s unemployment figures only include Americans who indicate they are searching for employment.  Those that have dropped out of the workforce, for example due to an inability to find work, are not counted as unemployed.  This ludicrous accounting practice shows a low unemployment rate while at the same time the more meaningful labor market participation rate remains at multi-decade lows, according to the New York Times.

It is telling that while the Labor Department releases optimistic, yet unrealistic employment figures, the Federal Reserve leaves the benchmark interest rates at historic lows.  The Fed’s action indicates the irrelevance of the Labor Department’s figures.

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