Economic Recovery?

The unemployment rate is based on the number of people looking for work, but at any one time there are a number of people who stop looking for work and, thus, are not considered unemployed. If you add these to the published unemployment rate, you always get a higher number. How high that number is no one knows.

But now comes Katharine Bradbury, Senior Economist at the Boston Federal Reserve. She has studied labor participation rates over economic cycles from January 1948 through February 2005. Her numbers show that the labor force has been especially hard hit in the most recent recession; labor has suffered more than in previous cycles.

There are fewer people in the labor force as of February 2005 than you would expect when comparing economic cycles. She feels that the lower participation rate could between 1 and 3 percentage points to the published 5.4% of last winter, resulting in a real unemployment rate of between 6.4 and 8.4%. Not exactly the booming recovery we hear so much about.