Matthew C Klein, Columnist

Is Jobless Rate Really Falling?

The unemployment rate has been falling even as millions of people have stopped looking for work. What does this mean for the health of the job market?

January 9, 2014 at 9:29 PM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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Over the past four years, the U.S. unemployment rate has fallen to 7 percent from a peak of 10 percent. Much of this progress may not be real. Sadly, the data in tomorrow's job report won't help us figure out the true state of the labor market.

About 6.5 million jobs have been added since the trough four years ago even as more than 11 million people have given up looking for work. Those people still exist even if they aren't counted in the unemployment number, which is why the employment-population ratio hasn't really increased since the worst of the crisis. On the other hand, baby boomers started becoming eligible for Social Security benefits in 2008, so some people are dropping out of the labor force for benign reasons.