We're all looking for crystal balls to tell us where the economy is going. One crystal ball that economists say is very cloudy is the unemployment rate. Why is this? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, as many people have heard, unemployment is a lagging indicator. That is, the broader economy will turn up first - will improve - before, for example, we see a decline in the unemployment rate. I think there are two reasons for this. One, employers need to be absolutely sure the economy is back before they go to the very important task of hiring new workers. So they'll need to have some evidence over several months that their sales are up, their revenues and profits are up before they say, ok, it's time for me to go ahead and hire permanent new employees. Secondly, the reason the unemployment rate tends to go up after the economy improves has something to do with how unemployment is measured. A worker is only considered unemployed if that worker is without a job, wants a job and is actively looking for work. And the problem we have is that many times, unemployed workers simply stop looking for work. They give up. And so we don't even count those folks as unemployed. Then, however, when the economy improves, those so-called discouraged workers will actually come back into the labor force, start looking for work, and until they get a job, they drive up the unemployment rate."