When is a flat unemployment rate good news?

On March 19, we announced that Washington’s seasonally adjusted unemployment rate for February was unchanged from January, at 6.4 percent, while jobs grew by an estimated 2,500.

In assessing the report, our labor economist said, “That’s a positive sign. The economy is holding its own.” Many people may wonder why it’s a good sign that the unemployment rate didn’t get better.

Economics can often be confusing, but in this case it comes down to simple math:

Unemployed job seekers ÷ total labor force = unemployment rate

As people begin to look for work, they become part of the labor force, even if they don’t have a job yet. In that case, they would be counted in both the “unemployed job seekers” number and the “total labor force” number. This sign of worker optimism actually can cause the unemployment rate to rise if job seekers aren’t able to quickly find jobs.

In February, two things happened that we like to see: Washington’s labor force grew by about 9,500, and the number of unemployed job seekers shrank by about 2,200 (both figures are seasonally adjusted). This is a nice contrast to the past year, when much of the drop in the unemployment rate was due to a shrinking labor force as many unemployed workers simply quit looking for work.

Something else to keep in mind if you’re struggling with the math: We routinely round the unemployment rate to the nearest 1/10th of a percentage point; otherwise, the February unemployment rate would have dropped to 6.35 percent.

Bottom line: The unemployed had a somewhat better time finding work last month. In these times of restrained expectations, that counts as a “positive sign.”

Sheryl Hutchison is Employment Security’s communications director.

Advertisements

2 thoughts on “When is a flat unemployment rate good news?

  1. Those workers who “stopped looking for work” are still not employed. They still aren’t making claims because their benefits ran out, and they are still not being counted as “unemployed”.

  2. Actually, the unemployment rate includes anyone who is actively looking for work – whether or not they’re receiving unemployment benefits. In fact, less than one-third of the people currently counted as unemployed are receiving unemployment benefits.

Comment

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s