Maybe not as much as some may think. The set of pictures on the labor market situation is not indicative of the sort of improvement that the drop in the unemployment rate, going below 8% for the first time since January 2009 when the rate was on the way up and reached the 7.8% mark, would normally attest.
The chart shows the regular rate of unemployment and the broader rate, U6.
Though the headline of the household survey looks “good”, the broader rate of unemployment, denoted U6 stayed put at 14.7%. The broader unemployment rate includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time job instead because that’s all they could find.
In September there was a surge of part-time employment of almost 600 thousand (see chart), which represented a larger increase than the fall in the number of unemployed and the lion´s share of the increase in employment. This helps explain both the significant the drop in unemployment and the constancy of the U6 rate.
This means that much of the explanation for the drop in the unemployment rate is due to an increase in the number of “desperate” workers that will take anything offered. I know, it´s better than nothing but takes away some of the luster from the headline 7.8%.
The set of charts below help keep track of labor market developments. There´s not much reason for contentment.