Drop In Unemployment Rate “Almost 100 Percent Due To Decline In Labor Force Participation Rate’

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Obama just can’t seem to figure numbers out.
Check it out:


For most of his presidency, President Obama has been focused on the economic short run — which makes sense, given that he took office in the midst of the biggest recession since the 1930s. With his big economic speech today, he’s shifting to the long-run, talking about the structural changes he thinks the economy needs to see for the U.S. to prosper going forward.

But anyone who thinks that the short-run battle is over should take a look at a new report by Daniel Alpert over at the Century Foundation. Alpert notes that while the headline unemployment number is well below its recession-era peak, that’s almost 100 percent due to declines in the labor force participation rate — that is, the share of the population that’s either employed or actively looking for work. Don’t believe him? Take a look at this chart [seen above].

The dotted red line is the U-3 unemployment rate, or the number you see everywhere. It can go down for one of two reasons: either more people are working, or fewer people are in the labor force. So which is it?

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