U.S. joblessness would be much higher if Americans dropping out of the workforce were taken into account, according to Albert Edwards, a global strategist at Societe Generale.
“The impression that unemployment has fallen” results primarily from a drop in the participation rate, Edwards wrote yesterday in a report. The rate is the percentage of working-age people who are looking for a job or already have one.
The CHART OF THE DAY compares the unemployment rate, as compiled monthly by the Labor Department, with adjusted figures that assume participation was unchanged in the past decade. The adjustment produces a 12.8 percent jobless rate for January, as the top panel shows. The actual rate was 9 percent after a two-month drop of 0.8 percentage point, the steepest since 1958.
Labor-force participation appears in the bottom panel. The rate declined last month to 64.2 percent, the lowest since 1984. The adjusted unemployment data is based on a rate of 67 percent, the average for 1996 through 2000.
“There are an awful lot of discouraged workers who might emerge from the woodwork to keep the rate of unemployment very high and wage inflation at its current low rate” as the economy grows, Edwards wrote.
Compensation rose last year by 2 percent, according to the department’s employment-cost index. The increase was the second-smallest ever for a calendar year, beating only the 1.4 percent growth in 2009. Records have been kept since 1982.
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