Unemployment Rate 7.2%

http://online.wsj.com/article/SB123150742539367897.html?mod=googlenews_wsj

by kp212 • 18 years ago

37 51 18 years ago

online.wsj.com

steveplace• 18 years ago

And to be the contrarian:

The NFP is Meaningless

http://www.ritholtz.com/blog/2009/01/counter-intuitive-nfp/

jbarciauskas• 18 years ago

The author is absolutely right - we knew this was coming. Another item he might have mentioned to bolster his claim is that there are other unemployment related statistics that are more meaningful than this one, commonly referred to as the "headline" number.

In fact, I googled as I was writing this post and found he addressed this 6 months ago, and made exactly the same case I'm about to make- the U3 number that is the "headline" number should be ignored, and we should focus attention on the U6 number. (http://www.ritholtz.com/blog/2008/06/unemployment-reporting-...)

A quick synopsis of the U6 measurement from his post: "U6, on the other hand, is the broadest measure of Unemployment: It includes those people counted by U3, plus marginally attached workers (not looking, but want and are available for a job and have looked for work sometime in the recent past), as well as Persons employed part time for economic reasons (they want and are available for full-time work but have had to settle for a part-time schedule)."

He also links to a nice chart: http://bigpicture.typepad.com/photos/uncategorized/2008/06/0...

yummyfajitas• 18 years ago

Just a minor nit: if a marginally attached worker looked for work, he would be unemployed.

"Unemployed" == "Not working but looking for work."

"Marginally attached" == "kinda wants a job, but not enough to actually look for one."

jbrun• 18 years ago

I never understood American unemployment numbers. Many countries operate fine with far higher unemployment numbers. Canada was at 7 or 8% for many years, France is often around 10%.

Also, I remember reading an article that talked about the vast number of people who are excluded from the American data. People in prisons for example - 2 million people. There are also people who do not file unemployment claims or are ineligible to do so because of much higher restrictions in the US compared to more liberal societies. Therefore, US unemployment figures are always about 2% too low, but it is one of these 'psychological' stimulus the government gives. If our unemployment rate is near 0, then economy must be doing great!

Please correct me if I am wrong.

ivankirigin3• 18 years ago

You're correct. The US only counts those looking for work.

neilc2• 18 years ago

AFAIK, everyone only counts those who are actively looking for work but can't find it: that's what the "unemployment rate" means.

http://en.wikipedia.org/wiki/Unemployment

razzmataz• 18 years ago

the BLS labor statistics only count people actively looking for work, and leave out 'discouraged' workers.

swombat• 18 years ago

Only one small correction: if the unemployment rate really approaches 0, then you have trouble, because growing businesses won't be able to hire, and there'll be missed growth opportunities.

The same is true in a consulting firm, for example. You want "chargeability" to be as high as possible, but if everyone is always out on projects, and there's no one on the bench, then you can't staff new projects that come up - which may hurt your existing client relationships, or prevent you from building up new clients, etc. So ideally you still want to have some people on the bench, free to take up new projects.

cx013• 18 years ago

Even if everybody is employed, people would still be looking out for better jobs than what they currently have. So I don't think there would be missed growth opportunites.

aneesh• 18 years ago

Another factor that might explain why US unemployment is lower than European countries like France & Germany.

The barriers to hiring & firing workers are typically much higher in most European countries. In the US, the laws make it easier to hire & fire, so the employment process is more "efficient".

eru4• 18 years ago

France has both difficult firing and minimum wage. In Germany it's not as bad: Firing is difficult, but there's no minimum wage for most jobs. Unfortunately minimum wage laws are all the rage, now.

mdasen• 18 years ago

First, I should correct you that both the US and Europe use the International Labour Organization's definition for unemployment: "those who are currently not working but are willing and able to work for pay, currently available to work, and have actively searched for work." Europe implements this as people who are not working, have looked for work within the past 4 weeks, and are available to start work within the next 2 weeks. The US methodology differs slightly, but not in a statistically significant way stating that workers must not be employed, they must have looked for work sometime in the previous 4-week period, and they must be available work work. The last part differs, but since these are surveys, I don't think anyone being asked "are you available for work?" would interpret that to mean at the precise moment. So, the US doesn't define "in the next two weeks" and so some people might interpret it to be a longer period and some might interpret it to be a shorter period, but I don't think you can say that American numbers don't count people that European numbers do count.

So, European and American unemployment rates can be compared with decent accuracy. The fact is that governments want accurate data. Inaccurate data just makes it harder to create policy that helps those governed.

One of the nice things about the American unemployment numbers is that they're more than a gross rate. The US also publishes numbers by certain groups. That allows me to say that the unemployment rate for men is 22% higher for men than for women or that teenagers have been the hardest hit group with unemployment at 20.8% for them. Likewise, there are interesting (if not meaningful) differences in the unemployment rate changes between groups. The African American unemployment rate is up about 30% YoY while the Caucasian unemployment rate is up a whopping 64% YoY.

Full data: http://www.bls.gov/news.release/pdf/empsit.pdf

So, why is American unemployment a bigger issue? You already mentioned it: we've got less good stuff coming from the government when we don't have a job. Healthcare especially is a problem. Beyond that, the amount of time that unemployment benefits last, the amount of each check, etc. just aren't as good. Unemployment is more of a hardship in America than in Europe. Europe has seen very hard times and it created a system that would allow people to get through many years of tough times. America has been able to limit tough times to be much shorter periods and, generally speaking, just has a "get off your butt" attitude.

Partly, this is because America has allowed for drastic economic changes in a way the Europe hasn't historically. The United States is more ready to see old industries die and to start new ones in their place. And so hard times do come (it's inevitable that you can't make something perfect), but they tend not to last as long.

Before I go further, I want to say that much of this is historical. The Europe of today isn't the Europe of even 20 years ago. That said, one way of thinking about this is code refactoring. It takes time, it can be painful as things that worked stopped working as you fixed it. However, arguing that something is working and just trying to (indefinitely) prevent any non-work in order to realign things for a better future is worse.

It's my personal belief that governments can help smooth over the "refactoring" by encouraging new industries to locate near industries that are closing down. Note, this can't be a "we'll just lower our taxes" scheme. There's no point in lowering taxes on a dying industry or throwing long-term government support behind it simply because failure of that industry means unemployment. You need to be smart and find industries that are likely to be growth industries that will progressively demand more labor as time goes forward. Keeping people employed is great, but encouraging industry that increases employment in the long-term is sooooooooo much better. And government can incentivisze new industries. It's hard and often people hate it because they see it as discriminatory against industries not getting the cool incentives, but some industries do benefit communities more than others and some industries are growth and some aren't.

In closing, I'll just say this: in the face of an economic crisis, it might be a good idea to repeal the employer part of the payroll taxes (note the might qualifier since I haven't studied this). It would lower the cost to employ someone by, what, 9%? As the cost of labor goes down, employers want more of it. And when the economy gets good again, it could be reinstated or not and if not would really just be passed to workers as salary increases (just like the employer part of the payroll taxes makes them pay you less each year because they need to pay the government for your employment).

nradov• 18 years ago

Are you suggesting that government should try to pick winners for which industries are likely to grow? How do you expect bureaucrats to do that? Industrial policy has a terrible track record in most countries.

galactus• 18 years ago

Unemployment is often portrayed as the cost that european countries pay for supporting developed welfare states. According to this line of thought, it is ok for the US to have much less advantages for unemployed people since it is much easier for someone who lost his job to find a new one.

If the US unemployment gets close to their european counterparts, this argument becomes harder to believe.

newt03113• 18 years ago

Until you look at France et al. and find that they have > 8% unemployment in the good times.

uuilly• 18 years ago

Another major difference is that unemployment benefits are much better in places like France and Holland and it encourages people to stay unemployed. Though we're not immune from this problem either. I recently met a lady who was, "on fun-employment," as she called it. "I get a card from New York City every two weeks that gives me cash from most ATM's. My rent also gets paid. I'm moving in with my future husband at his apt in the Hamptons but we're keeping my place in the city in case we want to come party for a w/e." When I asked how long things would go like that she said, "Another 15 weeks to be sure, but if I fill out some paper work I could stretch it to 40 weeks, and I hear that Obama wants to add another 9 weeks, so all it all it's about a year."

Anyone ever use fun-employment to bootstrap as startup? :)

patio113• 18 years ago

fun-employment

Please be a dear and forward that woman's contact information to the New York Republican Party. She has excellent career prospects as a talking point. (Hey, it worked for Joe the Plumber.)

I haven't been so disgusted since my $40,000 a year university had a newspaper publish instructions on how to apply for welfare benefits, "as most students are legally entitled to them and, hey, free beer money". (Some of us worked our way through college. Surveying the few I can remember, I think all moved rightward over their four years. Wonder why.)

gojomo• 18 years ago

I think your comment advances a common misconception, that unemployment percentage figures are derived from unemployment insurance benefit filings.

They're not. The unemployment percentage figure comes from a household survey by the federal government that simply asks people if they lack work and are looking. Whether one is eligible for, has applied for, or is receiving unemployment benefits is irrelevant.

ardit33• 18 years ago

from:

http://money.cnn.com/2009/01/09/markets/thebuzz/index.htm?po...

"But one prominent critic, John Williams, an economist and publisher of the research site Shadowstats.com, said that when you take into account the large number of people who have been so discouraged by job market woes that they have not been actively looking for work for more than a year, the unemployment rate is actually as high as 17.5%

Williams explains that prior to 1994, all people who were "discouraged workers" were counted in the unemployment survey. But that's no longer the case. So he believes his number is more of an apples-to-apples comparison to some of the numbers cited about the peak level of unemployment during the Great Depression, which was around 25%.

What's more, Williams believes that this and other tweaks to the employment calculations over the past few decades were designed to give a more optimistic view of the economy.

"I think it's true that changes have made to make numbers look better. If you don't think the system is political, you don't know the system." "

newt03113• 18 years ago

Think about this for a moment. 17.5% means that ~ every 1 out of 5 is out of work. Look around you. Does that even seem possible. That number is like the numbers proclaiming that there are 3 million homeless in the US and that men on average have more sexual partners than women (by a ratio of ~7 to 4). Its complete bullshit and if people thought about it for just a few minutes, they would realize it.

villageidiot• 18 years ago

The unemployment rate for IT workers is still closer to 2% according to an article I read somewhere recently (sorry, don't have the reference).

pchristensen• 18 years ago

Greenspun sliced up the unemployment numbers and got 9.1%

Unemployment statistics were redefined starting in the early 1960s by the Kennedy Administration. First they took out the "discouraged", people who wanted a job, but had stopped looking. Under the Reagan Administration, the workforce was expanded by adding in members of the U.S. military, who were by definition "employed", thus shrinking the percentage of "unemployed". The Clinton Administration reduced the number of households sampled from 60,000 to 50,000 and "a disproportionate number of the dropped households were in the inner cities." Phillips doesn’t talk about prisoners, but we have greatly increased our prison population, most of those incarcerated are working-age men, and none are counted in the workforce. Phillips claims that "Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent." [Poking around at http://www.bls.gov/cps/ reveals that, in 2007, 146 million of us were working, 7 million were unemployment, and 4.7 million were classified as not in the workforce but "wanted a job"; an additional 2.3 million Americans were in prison, presumably due to their energetic work habits in illegal trades. The "U-6" series, published by the BLS but almost never reported by newspapers, shows an unemployment rate right now of 9.1 percent.]

http://blogs.law.harvard.edu/philg/2008/04/23/cooking-gdp-un...

anamax• 18 years ago

> Phillips doesn’t talk about prisoners, but we have greatly increased our prison population, most of those incarcerated are working-age men, and none are counted in the workforce.

Many prisons have inmates who work at various jobs. Should those jobs count? If not, why should we count folks in prisons?

thomasmallen2• 18 years ago

I don't think that prisoners should be counted simply because they are incapable of finding real employment. It's despicable that the prisons only pay between a nickel and a quarter for an hour's labor. Worse yet is the private prison system that is funded by the government but can sell goods manufactured by what is, essentially, an enslaved people.

For this reason, those two million Americans cannot be considered as part of the real workforce, as their labor is essentially free.

jhancock2• 18 years ago

We should count the number of prisoners as an extra hardship on our economy. There is the cost of keeping them in prison, the cost of when they get out, the cost of the children they have but are not raising.

vaksel• 18 years ago

Those numbers are absolutely meaningless, since they count a $70K/yr job, in the same category as a $7/hr burger flipper.

You can take that 7.2%, and pretty much double it for all the people who got fired, and had to take a job paying half of what they used to make.

dfranke• 18 years ago

That's okay, as long that effect is roughly equal in every period of increasing unemployment. This and many other factors make it meaningless to treat unemployment additively, e.g. to say that 8% unemployment is "twice as bad" as 4%, but it doesn't diminish the number's comparative value, telling us whether we're better or worse off than before.

jmatt• 18 years ago

I'm interested in seeing how the unemployment numbers break out.

In the recent past, unemployment amongst people with a Bachelor's degree or better is about 2.2%^. So nearly zero. I'd imagine, though I'm not sure, that most people on HN have a bachelor's or better and thus most of us are at a lesser risk of unemployment than others. I think when this number changes we will know it's fundamentally different from other recessions that we've had in the last 30 years.

It's the rest of the population that takes the brunt of the economic downturn. Recently there has been reverse immigration, people leaving the US^^. And most of the people that are being hurt by unemployment don't have proper skill sets to just get another job.

I know a number of internationals working in the US and they are all still employed and in demand. Most people think that people on Visas are at risk. In fact I think there are plenty of jobs for the well qualified. Most of the professional Visa / Green card holders in the US got here because they were uniquely qualified - and that doesn't change with an economic downturn. There is, especially from my perspective, still continued demand for good IT people and good programmers^^^. Against popular belief but understood here at HN; not all programming jobs are outsourced. But many high schoolers and their parents believe this, so there are less people going into tech. This, of course, is good news for those of us who are already in tech. It also does a great job protecting us from economic downturns compared to other fields.

The WSJ, as usual, is out to sensationalize business as much as possible. I like the WSJ and read it regularly. I try to take it with a grain of salt. They'd like to have you believe the economy will never turn around. Because then when it DOES turn around it'll be great, new and unexpected news. In the end it's all about page loads or papers sold after all.

^ http://www.bls.gov/emp/emptab7.htm

^^ http://latinobusinessreview.blogspot.com/2008/12/hispanic-im...

^^^ Reported by the ACM so take it for what it is... http://www.cio.com/article/466228/IT_Careers_Expected_to_Sur... and http://www.networkworld.com/newsletters/edu/2008/120108ed1.h...

[EDIT: Formatting, and some additions ;-)]

nazgulnarsil3• 18 years ago

keynes created the fetish of full employment.

eru4• 18 years ago

Sources?

nazgulnarsil3• 18 years ago

have you read the General Theory of Employment Interest and Money? directly from the book: "THE outstanding faults of the economic society in which we live are its failure to provide for full employment" -from the chapter: Concluding Notes on the Social Philosophy towards which the General Theory might Lead

Keynesian economics focuses on full employment and income distribution as the primary failings of classical economics. In attempting to address these two non-problems keynes introduced blatant scientism into economic discourse.

lsc• 18 years ago

now is the time to hire.

You can pick up some good deals. Right now, especially with the 'just out of college' crowd, and if it's like the last downturn, in a year or two you will be able to find good people who got discouraged and did retail work for a while.

Unemployment Rate 7.2%

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