Economic Brief

June 2014, No. 14-06

Does the Unemployment Rate Really Overstate Labor Market Recovery?

Andreas Hornstein, Marianna Kudlyak, Fabian Lange and Tim Sablik

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Unemployment rose dramatically during the 2007-09 recession, peaking at 10 percent in October 2009. It has fallen steadily since then, at times outpacing economists' forecasts. In April, unemployment reached 6.3 percent, about two-thirds of the way back to its prerecession level. Such progress is often a sign of recovery, but some observers question whether the unemployment rate accurately measures resource utilization in the current labor market.

Additional Resources

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Fujita, Shigeru, "On the Causes of Declines in the Labor Force Participation Rate," Federal Reserve Bank of Philadelphia Research Rap, Special Report, February 2014.

Hornstein, Andreas, Marianna Kudlyak, and Fabian Lange, "A New Measure of Resource Utilization in the Labor Market," Federal Reserve Bank of Richmond, mimeo, April 2014.

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