Superficial drop in unemployment rate due to 20,000 jobless dropping out of the labor force
RALEIGH ( May 17, 2013) -- North Carolina’s jobs picture remains bleak despite superficial improvement the state’s unemployment rate, according to new numbers released by the N.C. Division of Employment Security today. Almost 20,000 workers dropped out of the labor force last month, including 15,000 jobless workers who were unable to find employment and gave up searching.
“Although today’s report provides some superficial good news, it’s not quite as good news as first appears,” said Allan Freyer, policy analyst with the NC Budget & Tax Center. “The unemployment rate is dropping because jobless folks are giving up on finding work and dropping out of the labor force, not because we’re experiencing significant and meaningful job creation.”
As a result of these changes, the labor force—the pool of prime age workers who either have a job or want one—is now at the lowest level since July 2012, erasing almost 9 months worth of gains. Even more troubling, the total number of employed people in North Carolina also dropped to the lowest levels since October 2012, suggesting that North Carolina's economy is continuing to struggle in generating long-term sustainable job creation.
Although the unemployment rate dropped from 9.2 to 8.9 percent in April, most of this improvement is due to a mathematical quirk in how the Bureau of Labor Statistics calculates the jobless rate, not meaningful improvements in the state’s job creation. This rate is determined by dividing the number of unemployed workers who are looking for work by the number of workers in the labor force.
Given that the labor force contracted by 20,000 and the total number of employed workers also dropped by 4,000 at the same time, it appears that the 14,000 drop in the number of unemployed workers is largely the result of jobless workers becoming discouraged—giving up on looking for work and dropping out of the labor force altogether. As a result, this makes the unemployment rate look lower than it actually is.