Distorted unemployment rate

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Distorted unemployment rate

On its surface, the labor participation rate looks like it's plummeting. It was 62% in December... inching toward its lowest level since the mid-1970s (not counting a brief dip at the onset of the pandemic). And it has been trending lower since 2007.

Take a look...

If participation is tanking, folks claim the unemployment rate may not be as useful as it once was. They say unemployment looks low because people aren't looking for work, not because everyone has jobs.

In fact, some argue it means the unemployment rate is artificially low.

It's true that weak labor-force participation could be cause for concern. If fewer people are looking for work, it might suggest a shortage of workers in the economy. That could slow economic growth.

Here's the issue... Most people don't really understand the labor-force participation rate.

Many people can work but choose to not work as they have the money before retirement age levels.


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