Let’s Not Celebrate the 3.9% Unemployment Rate

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There are lots of headlines today that are focused on the headline unemployment rate falling to 3.9 percent. I guess that’s why they call it the headline unemployment rate.

But this month it’s a mirage. Here’s an excerpt from the household survey that the BLS uses to calculate the unemployment rate:

Take a look at those numbers. The number of unemployed is indeed down by 239,000, but where did they go? Not to the ranks of the employed, which rose by only 3,000. It turns out they left the labor force entirely, which is why the civilian labor force fell by 236,000 even though the total population grew.

So, sure, the unemployment rate is down, but it’s because 236,000 people gave up and quit looking for work—which means they no longer get counted as unemployed. This is bad news, not good.