Low Unemployment Maybe BAD For The Economy

I read something recently that really made me think about unemployment. It apears that if unemployment dropps, it's good for the economy. The lower unemployment, the better.Lower unemployment, more jobs. However that may not be the case.

If you think about it, when employment reports are taken, those reports do not enclude those out of the work force ie, military, house wives/house husbands, retirees, those who have stopped looking for a job, etc.

So they are taken out of the pot. When unemployment in a bad economy drops, it is not always because there are more jobs, but because people decide they don't want to look for jobs and go into despair. They drop out of labour force.

"On the surface the unemployment rate going down seems good, but when you dig into the numbers, we can see that it has nothing to do with an increase in the number of jobs and everything to do with the fact that the labor force is shrinking."

Figure it this way. If the workforce is 1000 and 100 are out of work, the unemployment rate is 10%. But if 10 of those 100 stop looking for work, the workforce is 990, and the unemployment rate drops to 9.1%.

When you see that unemployment went from 9.5 to 9.4 from june to july, it is not that people are getting jobs and employment is better, but that people, in a bad economy, stop looking for jobs, and the labour force gets smaller. The headline is "Unemployment Drops to 9.4%!" What's missing from the headline numbers is the fact that 422,000 people stopped looking for work. and the work force shrunk. They are then removed from the poll. making it apear that 422,000 jobs were made but really they were lost.

We lost 422,000 jobs from june to july, and the economy is turning around isn't it.