Why Unemployment Rates Aren’t an Indicator of How Healthy an Economy is


Anyone who has been in an online debate knows that Democrats will spare no expense to defend President Obama’s record. Like any cult member, the liberal does not care how grounded in reality their claims are, they will not care to cite any of their claims (no, Salon articles don’t count), and they will blame anything bad they can’t defend on the opposition. Examples of this include the following statements:

“Obama has ended the wars! He got us out of Iraq and Afghanistan!”

“Obama fought to make the ‘rich’ pay their fair share!”

“Obama got millions of Americans affordable healthcare!”

“Obama brought gas prices down!”

“Obama lowered unemployment down to 5.5%!”

Each of these statements are incredibly easy to debunk. If Obama wanted to get us out of Iraq so bad, why did he basically stay as long as Bush wanted to, and why are we still in Afghanistan? If he wanted the rich to pay their “fair share”, why did he bail out the auto industry? If he got millions of Americans afforable healthcare, why were millions of plans cancelled and why have the costs steadily risen under him? If he brought gas prices down, why are gases prices inflating at 8% higher than standard inflation? These are all pieces of cake to refute, at which point the average Obama supporter will begin to respond with ad hominem personal attacks like calling you racist.

But the last claim, to their credit, is a little bit trickier to respond to. It’s true, the unemployment rate is lower under President Obama. However, this is no indication that the economy is doing well.

The unemployment rate is more of a “how bad is the economy” than a “how good is the economy” scale. It’s important to understand, before talking about the unemployment rate, to understand what it measures. The workforce is a more accurate measure of how many people in a given population are currently employed or desiring employment. The unemployment rate is what percentage of the workforce is currently looking for work but cannot find it. This is measured by the equation # of people in employed / # of people in the workforce. If you were to calculate this for the United States, it would come out to 5.5% of the population.

However, there are still a number of reasons why this isn’t a good sign that people are going back to work. For one, the workforce participation rate is the lowest it has been at in almost 40 years. This could indicate a rise in discouraged workers, which the unemployment rate does not measure. A discouraged worker is a person who has quit looking for employment and no longer is considered part of the workforce.

On the other hand, the unemployment rate could be distorted due to the number of people who are phantom unemployed. A person who is phantom unemployed claims to be looking for a job, but would not accept when offered one. This could indicate the unemployment rate is distorted.

While a low unemployment rate does not indicate how good an economy is, a high unemployment rate does indicate how bad an economy is. In conclusion, the unemployment rate is best used when measuring how bad an economy may be, not how good it is.

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Chris Johncox