The Real Jobless Rate

The four-week moving average on new claims for unemployment benefits has steadily decreased from a high in April of 658,750 to 465,250, a 29% drop. Yet most economists still think unemployment has further to rise.

The number of workers drawing regular benefits has fallen, from a record 6.9 million in June to just over 5 million. But instead of finding jobs, most of those people have exhausted regular benefits and joined the rolls of people drawing extended and emergency benefits. That number has swelled from 2.8 million in late June, when regular continuing claims peaked, to 4.7 million in early December. That extra 1.9 million matches the number of people no longer drawing regular benefits.

Those people already are counted in unemployment. Another 5.6 million aren’t: That is the number of people who have given up looking for work and no longer draw benefits and thus aren’t counted in the labor force or in unemployment. When these individuals start looking for work again, as they typically do in recoveries, they will rejoin the labor force, competing with the roughly 9.9 million people drawing benefits. That alone will raise the unemployment rate significantly.