Is the official unemployment rate misleading? A look at labor market statistics over the business cycle
In recent years, both economists and the popular press
have asked whether the measured unemployment rate
is “too low.” In particular, observers question whether
current unemployment rates accurately reflect labor
market weakness. By some conventional measures,
the most recent recession was relatively mild. The
official unemployment rate rose to a high of 6.3 percent
in June 2003, which is low by historical standards
(see figure 1), and real gross domestic product (GDP)
declined by only 0.5 percent, compared with a 1.3 percent
decline in the 1990–91 recession and an average
decline of 1.1 percent during previous recessions from
1960 to 1981. At the same time, others have argued
that this latest recession was not as mild for labor markets
as suggested by the maximum unemployment
rate level. Most point to the fact that based on payroll
employment numbers, there were 1.8 percent fewer
jobs in January 2004 than in March 2001.