Imagine you’re the captain of a nuclear submarine. You’ve just received word that there is an incoming torpedo headed straight for you. Now is no time to panic, it’s time to react. As you gather information to make your decision, your first mate bursts into the bridge and screams, “Turkey bacon has less cholesterol than normal bacon!” He’s not wrong. But under these dire circumstances, this information is not helpful.
Just as useless as the bacon fun fact is, the unemployment percentage is as well.
We often hear politicians and spokesholes bring up the unemployment number whenever it benefits their side. If unemployment is down, the people in power love to talk about it. If it’s up, the people out of power can’t stop rubbing it in the face of the people who are in power. And while this political exercise is as old as politics itself, it’s just about as useless as a chocolate teapot.
But Jobob, why are you saying these things about unemployment? How come the unemployment rate is useless?
Glad you asked. The unemployment rate is useless because of how it’s counted. When we hear things like “unemployment is down to 4%” we naturally think “Great! 96% of working Americans have jobs!” Right?
Wrong.
There are several factors in the unemployment rate that aren’t often mentioned and when they’re brought up, skew the usefulness of the number. For example, someone has to fit a very particular set of criteria to be counted in the unemployment number. You ONLY count as unemployment IF, you are not working, would like to work, and have actively looked for a job in the last four calendar weeks. This means that if you’ve been looking for a job for five weeks, guess what, you’re not unemployed, you just don’t have a job… Also not included are people who are simply discouraged because they think nobody will hire them. Even though those people would like a job, they do not count as ‘unemployed.’
See how this is starting to get ridiculous?
For these reasons, we should look less at the unemployment number (regardless of who’s in office) and instead at the labor force participation rate (which generally hovers between 60%-70%). But that’s if this sort of thing actually matters to you. If it doesn’t, the main point of this article is to let you know what to be on the lookout for whenever you hear anyone on TV talking about “well unemployment is down so we’re doing great!”
The unemployment number is not a good depiction of where our economy is. It’s just a talking point that people love to misuse.
