We Have No Idea What Is The Real US Unemployment Rate

One of the most important economic data for any economy is the Unemployment Rate. If you are a currency trader trading the USD pairs, then you should keep an eye on the US Unemployment rate. US Non-Farm Payrolls is one of the most important economic data that is released each month. Market most of the time reacts violently when the NFP Report is released. But do we have an accurate US unemployment rate.

No U.S. economic statistic is more important than the unemployment rate, which was officially reported as 6.2 percent in July. But a new academic paper, highlighted in the New York Times, finds that a long-known source of potential error in the unemployment rate “has worsened considerably over time.” The actual rate may be higher than the reported one, though it’s hard to know for sure, the paper says.

The unemployment rate is calculated by averaging the results from eight separate samples of the population, known as rotation groups. In theory, the people in all eight rotation groups should have the same likelihood of being unemployed, but they don’t. In the first half of 2014, the newest rotation groups had an unemployment rate of 7.5 percent. The oldest rotation groups had an unemployment rate of just 6.1 percent.

There is a new research paper published on the issue of the accuracy of the US Unemployment Rate. One of the authors is Alan Krueger, a Princeton University economist who was chairman of President Obama’s Council of Economic Advisers from 2011 to 2013. You can read the research paper here. Watch this video also and learn why fewer economists think FED Monetary Policy is on the right track.

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