April Jobs Report: Don't Believe Unemployment is Really Down to 7.5%

Official results are in. At 8:30 a.m. EDT this morning, the Bureau of Labor Statistics (BLS) announced that 165,000 new jobs were generated in the month of April. That was more than expected in initial reports earlier this week and marked an improvement over March. The U.S. unemployment rate, which has hovered just below 8% since September 2012, came in at 7.5%.

Many people will write about the jobs number and the unemployment rate and what they tell us about the U.S. economy. But can these two numbers possibly tell us the entire story? Definitely not. 

The Bureau of Labor Statistics divides the U.S. adult population into three categories: the employed, the unemployed, and those not in the labor force. The BLS's definition of "employed" is straightforward — anyone who worked for pay or profit in the prior week. The definition of "unemployed," however, is more complicated — anyone who does not have a job, is able to work, and has actively looked for work in the prior four weeks. If you are able to work but don't have a job and have given up hope of finding one, you are counted as "not in the labor force."

The public radio program This American Life recently produced an episode titled "Trends with Benefits," in which they reported that the number of Americans receiving federal disability payments has nearly doubled over the last 15 years. Today 14 million Americans are on disability. All 14 million people are counted as "1not in the labor force." They’ll never show up in a monthly jobs report, but they artificially reduce the unemployment rate. MIT Economist David Autor said, "It’s kind of an ugly secret of the American labor market, that part of the reason unemployment rates have been low until recently is that a lot of people who would have trouble finding jobs are on a different program. They're on the disability insurance program."

So today, as we wrack our brains to analyze the April jobs number and the unemployment rate, let's remember – these numbers aren't everything. There is a large part of our population to which we’re turning a blind eye.