Growth Begets Jobs, Not the Other Way Around

NEW YORK (TheStreet) — Last week’s unemployment rate drop gave the economy’s bulls and bears alike something to cheer. The bulls pointed to the drop as a clear sign of broad employment improvement. The bears pointed to it as a sign of the still-all-too-high unemployment rate that could tip us into the next recession. But neither analysis is really right.

Why? First, the official unemployment rate is arrived at through a bit of a wonky calculation. It isn’t just the number of Americans without work (defined by surveys of U.S. households) divided by the total workforce. It’s actually the number of out-of-work folks who “actively sought jobs” (based on a survey), divided by the estimated workforce. Folks actively seeking jobs fell by 549,000 in November — but that doesn’t mean they all found new jobs. Rather, about half found jobs, and the other half gave up looking — thus neither camp was “actively” seeking a job. So yes, unemployment fell and total employment rose, but the official unemployment rate doesn’t perfectly reflect that.

Read the rest of this article on The Street.