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TODAY'S QUESTION: Does lower unemployment rate signal an improved economy?

Friday, February 4, 2011 | 11:04 a.m. CST; updated 7:56 p.m. CST, Saturday, February 5, 2011

December's unemployment rate in the United States came in at 9.4 percent, four-tenths of a point lower than the previous month. A decline this steep has not been seen in more than 11 years.

In a recent article from The New York Times, Floyd Norris compares December's steep decline to a similar situation faced in 1983 by the Reagan administration. In both instances, the stock market was strong but people overlooked this fact because of problems with the economy.

In 1983, Reagan's administration witnessed a steady decline in the unemployment rate, from 10.8 percent to 8.3 percent. It appears that the rate is continuing on a similar decline today. A recent report from the Bureau of Labor Statistics states that January's rate fell four-tenths of a point lower than December's, to 9.0 percent. The 0.4-point drop occurred for only the ninth time in 45 years.

This decline might add to an improving economy. The first report regarding gross domestic product for the fourth quarter of 2010 showed a 3.2 percent annual increase, and personal consumption rose 4.4 percent. These indicate that Americans are spending more.

Inaccuracies do occur with these figures, and final fourth quarter reports released in May will give a better indications of the GDP growth rate.

The number of jobs added to the work force in January was 36,000 — not many when compared with 103,000 added in the same month in 1983. Ben S. Bernanke, chairman of the Federal Reserve, sees this as cause for concern.

"Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established," Bernanke said in an NPR report.

Does the recent decline in the unemployment rate indicate an improvement in the economy?


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Comments

Paul Allaire February 7, 2011 | 8:50 p.m.

It means more as a January figure than as a December figure. Really not bad considering our transition to a service economy.

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