I thought you would be interested in the following story from last week’s The Wall Street Journal.
The market tanked Wednesday on bad preliminary job news. And so, when Friday’s jobs report is released, the unemployment rate and the number of new jobs will come in for close scrutiny. Then again, they always attract the most attention. Even the Federal Reserve focuses on the unemployment rate, announcing on a number of occasions that a rate of 6.5% will indicate when it is time to start raising interest rates and winding down the Fed’s easy-money policies.
Yet the unemployment rate is not the best guide to the strength of the labor market, particularly during this recession and recovery. Instead, the Fed and the rest of us should be watching the employment rate. There are two reasons.