Unemployment May Drop, but That’s Not Enough

It is obvious that once a month the latest jobs report is the most important check-up on the economy, as it will be in the coming week. What is more complex is deciphering the data to discern meaning. There will be several contradictory clues on employment hidden beneath the headline numbers when the government releases the March jobs report Friday morning.

While the unemployment rate has been steadily (and thankfully) falling, plenty of Americans have opted out of the workforce. A drop in the unemployment rate is welcome, but the decrease has been helped in recent months by the stagnant labor pool.

The number of Americans in the labor market has not been growing much. That can be partly explained by demographics. Sure, we’re getting older. But hundreds of thousands of people in the past year have dropped out of the job market even though they want to work now. Frustration and exhaustion have led many would-be workers to resign from the employment market altogether. Those withdrawing help improve the unemployment rate because they are not counted among the jobless.

More than 2 million jobs have been created in the past year, yet pay has barely crept higher. Like all markets, labor is subject to the law of supply and demand.