The unemployment rate dropped more than expected today, which is good news for those finding jobs. There was real job-opportunity growth, but there is another piece to the story. It turns out that there were fewer people looking for jobs.
The unemployment rate relates to the number of people who counted themselves as being in the labor force seeking jobs and the number who have jobs. In November, the number who counted themselves in the labor force fell by 315,000 from October, and this accounts for part of the decline in the unemployment rate.
The unemployment rate has remained around nine percent for most of 2011 because jobs growth is lagging behind economic growth.
It’s unlikely that we’ll see a significant downward trend in unemployment until 2015 or 2016 due to a slow economic recovery from earthquakes in Japan, hurricanes and floods in the U.S., European economic tremors, and the continuing moribund housing sector. Nine-percent unemployment will likely lie in the range we see in the near term, but as time passes, redefining “work” and who works can bring the rate down.