Is The Economy Getting Stronger?

Reuters posted a story today about the latest jobless claim numbers.

The article reports:

The number of Americans filing new claims for unemployment benefits last week increased to the highest level since early September, but the underlying trend continued to point to a strengthening labor market.

Initial claims for state unemployment benefits rose by 19,000 to a seasonally adjusted 316,000 for the week ended Jan. 10, the Labor Department said on Thursday.

Economists polled by Reuters had forecast claims falling to 291,000 last week. The prior week’s data was revised to show 3,000 more claims received than previously reported.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose by only 6,750 to 298,000 last week.

Notice that the number of jobless claims is rising–not falling. The article then goes on to imply that this is an indication of a strengthening economy. However, there is something the article fails to mention.

A website called ycharts has posted the following graph:

LaborForceParticipationRateA shrinking labor force is not a sign of a growing economy. Keep in mind that the unemployment rate is only based on the number of people who are in the labor force–therefore the actual unemployment rate may not be the one the government is citing. If the unemployment rate were calculated based on the number of people who are actually out of work and not looking for work, the number would probably be well into the teens. Again, we are being told the economy is strengthening, but that is not necessarily the case.