When you hear that the unemployment rate has gone down, you usually think the economy is doing better right? But the numbers don’t always tell the full story. This is what’s not said!!!
If someone has gotten so frustrated that they’ve stopped looking for work or, just decided that they wont work anymore, they no longer get counted as unemployed. So imagine you had a town with a 100 people and 10 of them were unemployed and trying to find jobs, the unemployment rate would be 10%, makes sense? Now imagine that 5 of those people got tired of looking for jobs and decided they were going to move into their parents basement. The government would now say that the unemployment rate has gone down to 5%. But that seems odd doesn’t it? The people in the basement are no longer part of the labor force because they’ve given up, so the labor force participation rate goes down as well –not exactly a reason to celebrate.
So while the unemployment rate is important, the labor force participation rate as you can see tells the real story. Remember this the next time you hear a reporter on the news say the unemployment rate is getting better!
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All about the participation rate. If people are not looking for work that doesn't mean they are now employed (according to unemployment rate) lol