Federal Reserve Economic Data: Your trusted data source since 1991

The FRED® Blog

Why is the unemployment rate not decreasing?

The U.S. economy has been adding jobs continuously for several years. In fact, payroll employment growth has been consistently higher than measures of population growth, including the civilian population shown in the graph above. This is definitely an encouraging sign for the health of the labor market. The unemployment rate has steadily decreased over this period, yet it has hardly moved in recent months: It was 5.1% in August 2015 and is 5.0% as of April 2016. With this larger inflow of employed people than people in general, the unemployment rate should decrease, right? That would be correct if the proportion of people in the labor force remained constant. But it has not remained constant, as is visible in the graph below. The labor force participation rate has been increasing significantly in recent months after a decades-long decline. A large number of people who previously declared they were not in the labor force (not working and also not looking for a job) are now in the labor force. Some of these people are unemployed, and these additions to unemployment rolls have been large enough to almost exactly erase the gains made in employment.

How these graphs were created: For the first graph, go to the most popular series (shown on the FRED homepage, under “At a Glance” tab) and click on the payroll employment link there. Then add the civilian noninstitutional population series to the graph. Finally, change the units of both series to “Percent Change from Year Ago.” For the second graph, search for and add “Civilian Labor Force Participation Rate” to the graph, then add the unemployment rate series. Finally, set the y-axis to the right for the latter.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CIVPART, CNP16OV, PAYEMS, UNRATE

Subscribe to the FRED newsletter

Follow us

Back to Top