The unemployment rate fell again in December, from a revised 8.7% in November to today’s 8.5%. Since September of this year, the unemployment rate has fallen half a point, from 9%, while the U.S. economy has added only 400,000 jobs. But, according to the Federal Reserve, the U.S. economy must add more than 110,000 jobs a month for the unemployment rate just to keep up with population growth. So if job growth is at a point where we should only be treading water, why is the unemployment rate falling so fast?
The answer is that more and more Americans aren’t looking for work. Our unemployment rate is not dropping due to job creation, it is dropping becauseof workforce attrition. Between December and November, 50,000 Americans dropped out of the civilian labor force. That number was even higher between October and November when 120,000 Americans stopped looking for work.
