Can U.S. unemployment rate fall to 8% by next November?

Economists have generally dismissed such a prospect (if anything, some of them expect that the rate, now at 8.6 percent, will edge higher next year). But it is possible to reach the 8 percent level, though for reasons that don't necessarily mesh with an improved economy. In determining unemployment, the most important variable is the participation rate - that is, how many Americans are actively looking for work and how many have given up. From Ezra Klein:

Remember that the unemployment rate is not "how many people don't have jobs?", but "how many people don't have jobs and are actively looking for them?" Let's say you've been looking fruitlessly for five months and realize you've exhausted every job listing in your area. Discouraged, you stop looking, at least for the moment. According to the government, you're no longer unemployed. Congratulations?

The lower the participation rate, the fewer number of jobs would have to be created in order for the rate to go down. The rate is now 64 percent, down from 66 percent during the recession. As explained at Calculated Risk, an 8 percent unemployment rate would be within reach if the participation rate falls to 63.5 percent. But this wouldn't necessarily be good news - it would only mean that fewer people were actively looking for a job. As you might guess, such numbers could be spun any which way, especially in an election year. And no doubt they will be. But since the jobless rate is still the prime metric on which the state of the economy is judged, I'm guessing that an 8 percent rate, no matter what the circumstances, would be low enough to get Obama reelected. On the flip side, anything over 9 percent would be disastrous.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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