A New Normal?

"Always look on the bright side of life." -- Monty Python

    The unemployment rate in the U.S. hardly moved in April, the government said Friday, but media proclaimed it the lowest in five years. Both are true, so take your choice. At 7.5 percent, the rate was down four-tenths of a point from January, when it was 7.9 percent -- a good change from the double-digit rate of a couple of years ago, but how good is it, really, compared to some years when it was below 5 percent?
   There was a time when economists said a rate of about 6 percent constituted "full employment" -- whatever that is. But after several years of the rate being below 5 percent, academics began to question just what an "acceptable" rate would be. That is, there will always be some unemployment, as students enter the workforce, or women return to the workforce after children grow to school age, or workers quit to find a better job. All this in addition to the more noteworthy reasons of being laid off or fired.
   But the Bureau of Labor Statistics also reported that the labor force participation rate -- the number of people who actually have jobs -- has barely moved. At 63.3 percent in April, it too was down from the January rate, but by only three-tenths of a point.
   So both the participation rate and the unemployment rate are down by less than half a point. Some 63 percent of people of working age actually have jobs, and the unemployment rate is holding fairly steady at about 7.5 percent.
   That does not compute, you say? Of course not, because the figures are calculated differently, using different sets of data and different methods. Remember that the unemployment figure does not count students, the sick, prisoners or the military, or people who have given up looking. This number can be dramatic, because being unemployed can be disastrous, not only to individuals and families, but to the overall economy. The labor force participation rate, however, has barely moved from the mid-60 percent for years.
   Something that doesn't move, however, does not a news story make.

   Meanwhile, the European Central Bank cut its lending rate to 0.5 percent -- its lowest ever -- in an effort to boot the economy. This is still higher than the 0.25 percent the Federal Reserve charges its borrowers.
   So there are still some cross winds to cope with as the world economy tries to work its way upstream. The question now becomes, how long will these conditions hold, and is this a new normal?