Friday afternoon news that nobody will care about come Monday ...

USA Jobless Rate Understated

WASHINGTON (MarketWatch) - The current low U.S. unemployment rate probably understates the true level of joblessness by 1 to 3 percentage points, the senior economist at the Boston Federal Reserve says.

Millions of potential workers who dropped out of the labor force during the recession four years ago have not returned as expected and are thus not counted in the official unemployment statistics, said Katharine Bradbury in a paper published by the Boston Fed.

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Some policymakers have argued that the economy is close to full employment with the jobless rate at 5%, thus justifying higher rates to pre-empt inflationary pressures from building in a tight labor market.

While the official unemployment rate has fallen from a peak of 6.3% inJune 2003 to 5% in June 2005, the labor force participation rateremains close to 15-year lows of 66%.Typically, labor force participation rates rebound sharply following recessions, Bradbury found.

The official jobless rate understated the severity of the slowdown in 2001 and has overstated the strength of the recovery since then, she said.

So folks - how do we feel about jobless rates of 6-8%? We've been through joblessness in my house (a couple of years, actually) and were fortunate to have healthy IRA's and 401ks. Past tense. We burned through nearly $80,000 in retirement savings - which we paid a penalty on, natch - and are now having to start over. But let me tell you, that $300 tax break sure came in handy. Thanks Georgie, love ya - mean it!