Friday, September 9, 2011

Unemployment Insurance Benefits and the Jobless Rate

A recent report from Macroeconomic Advisers explains how extended unemployment benefits may distort the monthly unemployment numbers published by the Bureau of Labor Statistics (BLS).

The Macroeconomic Advisers' analysis estimates that extended benefits have resulted in inflated BLS estimates of the labor force* by nearly 1 million unemployed persons over the last year. That's because the unemployed are required to actively seek work in order to receive benefits. The inflated number of unemployed persons translates to an unemployment rate 0.6 percentage point higher than would otherwise be reported.

A Wall Street Journal summary of the report findings notes that the result is a national unemployment rate of 9.1 percent, rather than the 8.5 percent that would be seen if those million people discontinued their search for work.

However, the article notes that the unemployment rate drop would come as a consequence of having fewer available workers, so the lower number would not reflect improved economic conditions.

Get more information from the Wall Street Journal or Macroeconomic Advisers.

*The labor force consists of those who are employed, and those who are unemployed but actively seeking work.

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