Good News, Right?

On the wire: “The Labor Department reported the nation’s unemployment rate declined to 6.2 percent in July from 6.4 percent in the previous month.” But before you get excited, read the next sentence:

The figure was slightly better than analysts’ estimates, but much of the drop came from 470,000 disenchanted people who abandoned job searches.

Remember that the unemployment rate is computed as

(# people actively seeking work)/(#people in the labor force),

so when would-be workers get discouraged and stop looking for a job, they are not counted as part of the labor force and the measured unemployment rate falls.