So the unemployment rate reached below that magical number, 6%. That number became the figure to watch when Fed Chair Janet Yellen said bond buying might be relaxed and interest rates might make a reversal upward when the economy was strong enough to absorb the shocks of the cessation of quantitative easing. The strength in the U.S. economy, according to Yellen, was symbolized by this magical 6% number.
Now that we are well below 6%, with a jobless rate of 5.6%, isn’t it time to break out the champagne? Not so fast. The average American may still not be able to make a toast on a Bud. Jim Clifton of The Gallup goes so far as to call the 5.6% unemployment number “a big lie.”
But do numbers lie? Well, they can be stingy with the truth. The problem isn’t the number, but who is considered unemployed. Many of those not working who have simply given up, even as their family needs that additional income, are not counted as unemployed. A darker side to the low unemployment number is that the U.S. has the lowest labor participation rate since the financial downturn in the 1970s, which simply means, many people feel disillusioned and don’t bother.
The other thing not measured is if people are severely underemployed. For instance, maybe their household needs two paychecks and they only have one. Perhaps they need to work full-time instead of part time. Or maybe they are nuclear physicists who are forced to work at Wal-Mart because they can’t find anything in their field. Who knows, perhaps even the guy who comes up to your car and starts squirting Windex on your windshield and wiping away without your permission while hoping for pocket change reports he is employed to preserve his dignity.
The number also doesn’t measure the fact that wages are stagnant, that many workers are willing to endure pay decreases, cuts in hours and benefits, to hang onto their jobs by their fingernails while their standard of living goes down the drain. They may be employed, but they may be working harder in a harsher work environment for the same take-home pay they enjoyed a few years earlier with less time and effort.
The cruel irony is that Janet Yellen is using this mythical 5.6% unemployment number as a sign that it is safe to raise interest rates. The reality is, while so many are underemployed, working more hours for less and seeing their wages flatlining, interest rates on their mortgages (if they even managed to afford a home) will go higher, thus reducing even further their living standard and sending them further into debt.