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Why the Lower Unemployment Rate Is Bad News

The unemployment rate has declined to 5.3 percent this month, but no one's planning a parade to celebrate. If you've been keeping up with news on the economy, that might sound crazy. After all, this is the lowest unemployment rate since April 2008, when the recession was first taking hold. Why aren't we cheering in the streets?

The unemployment rate has declined to 5.3 percent this month, but no one’s planning a parade to celebrate. If you’ve been keeping up with news on the economy, that might sound crazy. After all, this is the lowest unemployment rate since April 2008, when the recession was first taking hold. Why aren’t we cheering in the streets?

unemployment line

(Photo Credit: woodleywonderworks/Flickr)

It makes more sense if we take a look at the full picture. We can’t just look at the unemployment rate. We must look also look at how many unemployed people are actively trying to get jobs, plus wage growth over time.

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Wages Haven’t Gone Up

Salaries have remained stagnant, so you probably didn’t get a raise recently, right? That’s because your boss wasn’t pressured to pay higher wages to attract new employees. While that might be considered great news from your boss’s point of view, it’s not a positive sign for the state of the economy and for your career outlook.

More Jobs? 

Comparatively, the number of new jobs has continued to decrease, dragging that 12-month average downward. The lower number, overall, is a cause for concern. It points to the fact that we still haven’t recovered completely from the recession, and it offers fodder for further concern – particularly with other factors (like the international debt crisis in Greece and the looming proposition of an interest-rate hike in September 2015). Yes, we’re seeing more new jobs (223,000), but it’s still a disappointing net gain.

Participation Rate Is Down

Last month’s labor force participation rate was the worst since 1977. While retirement can account for some of that discouraging drop to 62.6 percent, the rate for the 25-to-54 “prime” group also showed no signs of improvement, according to The New York Times. Many unemployed Americans may have ceased trying to find jobs. 

Ending on a positive note, we could say: it could definitely be worse. The unemployment rate could be soaring, along with all the other discouraging news! It’s become clear, though, that for some unemployed workers, the news has been discouraging enough. 

Tell Us What You Think

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Esther Lombardi
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