Economy Continues to Struggle Despite Unemployment Report

Justin Haskins Heartland Institute
Published February 11, 2015

The Bureau of Labor Statistics (BLS) released its January 2015 report on Friday, and the Obama administration is sure to be happy with its findings.

According to the report, the U.S. economy added 257,000 jobs, and the unemployment rate moved up slightly to 5.7 percent. The number of full-time workers also increased, along with a slight improvement in wages.

But despite all of the seemingly positive news, key economic indicators still suggest the economy has improved little over President Barack Obama’s time in office. Many Americans are actually worse off than they were at the start of 2014.

Perhaps the most misleading aspect of the unemployment drop is that it fails to take the labor force participation rate—the number of people considered to be working or actively looking for work—into account when presenting unemployment data. This is especially important because since Oct. 2009, when the U.S. unemployment rate hit 10 percent, the number of workers considered to be a part of the workforce relative to the size of the population plummeted.

In Oct. 2009, the labor force participation rate was 65 percent, according to the BLS. The most recent available data indicate that although the unemployment rate has fallen from 10 percent in Oct. 2009 to 5.7 percent in Jan. 2015, the participation rate has significantly dropped to 62.9 percent.

The data show that one of the key reasons the unemployment has fallen is there are less people in the available labor pool relative to the population, not because the economy is growing at a rapid rate. If today’s labor participation rate existed back in Oct. 2009, the unemployment rate would have been 6.5 percent, not 10 percent. This means that since 2009, relatively speaking, the U.S. unemployment rate has improved by less than 1 percentage point.

The reason unemployment appears to be progressing at such a significant rate since the height of the recession is because the Obama administration’s employment data are wildly misleading the American public; the so-called improvement is truly unimpressive when all the relevant factors are taken into consideration.

Another important economic indicator to consider is the quality of the work available. While it’s true average private hourly earnings improved to $24.63 in Dec. 2014 from $24.22 in Jan. 2014, this increase was just barely enough to keep up with inflation, and the wage increase is not enough to match the rising cost of food, electricity, gas, and medical care commodities and services, according to the BLS consumer price index for all urban consumers.

No reasonable person will argue the economy is worse off than it was at the height of the 2008 economic crash, but those who claim America’s economic outlook has dramatically improved over the past two years are simply not paying attention to myriad data that prove the opposite to be true.

The unemployment rate remains one of the go-to signals of economic improvement or decline for many pundits and media outlets, but those who are serious about studying the state of the U.S. economy know the unemployment rate has transformed into nothing more than a political tool for presidential administrations, both past and present, to use at their leisure to mislead Americans into believing the economic climate is better or worse than it actually is.

[Originally published at]