Is The Unemployment Rate Lying To You?

The Bureau of Labor Statistics is out with its February jobs report, showing that the unemployment rate is 4.9 percent—a post-recession low.

Good news, right?

Depends on how you look at it. This number does not take into account that millions of people have simply given up looking for jobs, dropping out of the labor force altogether.

When job-seekers stop looking for jobs, they are no longer counted as unemployed, painting a rosier picture of the unemployment rate.

And that’s exactly what’s happened. A new analysis by the Job Creators Network shows that the drop in the unemployment rate has been largely driven by people dropping out of the labor force, not by getting new jobs. Since the Great Recession, the labor force participation rate has dropped from 66 percent to a historically low 62.9 percent in February. This means that at normal labor force participation 7.8 million more American adults would be working. Taking these people into account puts today’s unemployment rate at 9.4 percent.

The Job Creators Network made a brief video explaining the difference between the unemployment rate and the labor force participation rate to explain how the topline unemployment rate can be misleading.

What’s more, a recent White House report predicts that the labor force participation rate will continue to decline in the short-term because baby boomers are leaving the workforce for retirement—which may also prop up official unemployment numbers. And when that happens, the federal government will laud the decrease again as a sign of a strengthening workforce.

So how do we actually get the labor market back on track and put people back to work?

The answer is lower taxes and a simpler tax code, fewer government regulations, and easier access to capital. That’s why JCN recently launched a campaign called “Bring Small Businesses Back,” which proposes solutions to these problems and pushes policymakers to address them.

Alfredo Ortiz is the President and CEO of the Job Creators Network.