Unemployment Lowest It's Been In 6 Years, But Not What You Think

News & Views | Gerren Keith Gaynor | 05/02/2014 | 11:15 AM EDT

The jobless rate drops to 6.3 percent, but number of Americans in labor force drops and hourly rates remain flat

The national unemployment rate in April dropped to 6.3 percent, which is the lowest it’s been since September 2008. But while many are touting it as a win for the American economy, other figures suggests the jobless rate only tells half the story.


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After a sharp slowdown in December and January, and a modest improvement since then, economists had been forecasting a healthy gain for April as consumer and business activity rose in tandem with temperatures in many parts of the country.


The good news, however, is offset by the fact that 806,000 people dropped out of the labor force pushing the labor participation rate down sharply. And despite the fall in joblessness, average hourly earnings did not rise at all.


As reported by The New York Times:


To be sure, month-to-month swings in hiring are a snapshot of the economy, rather than a portrait, and frequently blur.


For example, government statisticians on Friday revised upward the number of jobs added in February and March by 36,000 total, suggesting the economy was stronger than first assumed. And the April data could be significantly revised upward — or downward — next month.


The monthly Labor Department report is based on two separate surveys, one of households, the other of establishments, including government agencies, and private-sector businesses like factories, offices and retail stores.  


The establishment survey provides the monthly estimate for payroll changes, and is favored by economists and professional investors, while the unemployment rate is derived from the more volatile survey of households. Although the two measures tend to correspond over time, month-to-month variations can be wide.


At 6.3 percent, the unemployment rate is down sharply from the peak of 10 percent it reached in the wake of the recession in October 2009. However, it is still higher than the historical average for this stage of an economic recovery.

(Photo: AP Photo/M. Spencer Green, File)

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