It is undeniable that the labor market has improved in recent years as the official unemployment rate has tumbled from 10 percent in late-2009 to a four-year low of 7.7 percent as reported here last week. But, it’s also quite clear that the labor force participation rate and related factors are skewing the data quite a bit, another example of which is shown below via the St. Louis Federal Reserve Economic Data.
In what makes sense only to a government economist, when the number of Americans “not in the labor force but still wanting to work” goes up, the jobless rate ticks down, as was the case last week.
Since the unemployment rate fell more than two percentage points over the last three years, there are actually hundreds of thousands more people in this category as well as a big increase in part-time workers and multiple job holders, all of which have played a key role in reducing the headline “jobless” number.