Lower Unemployment May Paint Incomplete Picture

The Labor Department reports that the country's unemployment rate fell sharply last month. It dropped from 9 percent to 8.6 percent. Unfortunately, the real labor market may not have improved all that much. Many workers have given up looking for jobs, and their "retirement" can skew the unemployment rate, making it look better than the reality.

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And I'm Guy Raz. 8.6 percent, that's the new unemployment rate according to a report out today from the Labor Department. The headline number looks like a big improvement compared to the 9 percent of October's jobs report, but it tells two very different stories. On one side, the employers added more than 100,000 jobs; on the other, three times that many Americans simply stopped looking for work and disappeared from the unemployment math. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: 8.6 percent is still a pretty high unemployment rate, but that's actually the best that it's been in nearly three years and that improvement had to be welcome news to President Obama.

PRESIDENT BARACK OBAMA: You know, as president my most pressing challenge is doing everything I can every single day to get this economy growing faster and create more jobs. This morning, we learned that our economy added another 140,000 private sector jobs in November. The unemployment rate went down.

ARNOLD: The president was touring a construction site in Washington, D.C.

OBAMA: How you doing? Good to see you.

ARNOLD: Construction is one of the few sectors to still be seeing some job losses. That industry lost another 12,000 jobs last month. So the president is pushing for a plan for the private sector to hire tens of thousands of workers to make buildings more energy efficient.

OBAMA: And when millions of construction workers have found themselves out of work since the housing bubble burst, it will put them back to work doing the work that America needs done.

ARNOLD: The president actually didn't focus too much on that 8.6 percent unemployment rate number. And that may be because even the White House itself acknowledges that new jobs probably only accounted for about half of that drop in the unemployment rate. The other half is due to discouraged workers dropping out of the labor force. Or in other words, if fewer people are even bothering to look for a job, that makes the official jobless rate go down.

NARIMAN BEHRAVESH: Almost 300,000 people stopped looking for work and so that's not a good situation.

ARNOLD: Nariman Bahravesh is chief economist at IHS Global Insight. He says this latest employment report shows that the economy is still gaining jobs, but pretty slowly.

BEHRAVESH: I would say it's still too early to break out that champagne, but it's moderately good news.

ARNOLD: Other analysts seem to agree about this big apparent drop in the unemployment rate.

BOB COSTELLO: I would caution people not to get too excited about that. I think that there's a good chance that that number will come back up.

ARNOLD: Bob Costello is the head economist at the American Trucking Associations. He says over the past year, the country has only averaged 130,000 new jobs per month. He says with upwards of 13 million Americans still unemployed and looking for work, and on top of that, discouraged workers who will come back into the workforce, he thinks the unemployment rate will rise again.

COSTELLO: We think it's going to hover around 9 percent going forward for the foreseeable future, simply because at 120, 125,000 jobs, it's really not enough job creation to lower that unemployment rate that much.

ARNOLD: So the question is when will the pace of hiring finally pick up?

CARL PASCIUTO: That is the lubrication pump for an airplane...

ARNOLD: Carl Pasciuto is standing on his factory floor surrounded by newly machined metal parts. Pasciuto is the president of The Custom Group. It's a manufacturing company outside Boston. We've been checking in with him since the recession and he says business is continuing to recover and he has been bringing on some more workers.

PASCIUTO: Well, yes, we are in a hiring mode. I would like to be busier, but we've been fortunate enough that the economy has been good enough to support the staff that we have and to grow.

ARNOLD: For his part, Nariman Behravesh says that he's encouraged that in recent months the government keeps revising its previous jobs data to show more job growth. He says that can be a sign that the recovery is finally gaining some steam. Chris Arnold, NPR News, Boston.

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