Monday, April 9, 2012

What causes the unemployment rate to fall

In a previous post, I wondered whether the unemployment rate falls more because of people leaving the labor force or because of job creation. WaPo comes down on the former at least as far as the latest job numbers are concerned:

In March, the unemployment rate dropped from 8.3 percent from 8.2 percent. But that wasn’t because the economy added an enormous number of jobs.

Rather, as Sarah Kliff pointed out, it was largely due to the fact that 164,000 fewer people were actively looking for work — and they don’t count in the unemployment tallies.

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