America's Effective Unemployment Rate at 18.7%?
Each month, I receive from Leo Hindery an update on "America's effective unemployment rate" which includes not only the official unemployment figures but other data points showing off-the-books unemployed or underemployed people.
The numbers are staggering and are aggregates of official data. They matter because various Obama administration officials including the President himself started off calling for huge stimulus packages to help generate "jobs, jobs, jobs!"
But now, I have been hearing more and more from senior Obama economic team members about the jobs they hoped for coming at the very tail end of an economic recovery. Others are talking about a GDP recovery -- but not a jobs recovery. They are admitting as well that they underestimated the severity of this recession and its impact on unemployment levels.
And all this while Goldman Sachs and other financial houses have seen their balance sheets get cleaned up and bonuses surge.
Hindery writes:
Here is a June 2009 version of the summary that calculates the Effective Unemployment Rate, which is now 18.70%, and the Effective Number of Unemployed, which is now 30,172,000.There are currently 14,729,000 officially unemployed workers, as just announced. However, this figure does not include the combined 15,443,000 workers either (1) in the "labor force reserve" because they have abandoned their job searches (i.e., 4,278,000) or (2) underemployed because they are "part-time of necessity" (i.e., 8,989,000) or "otherwise marginally attached" (i.e., 2,176,000).
The effective unemployment rate is therefore 18.70%, instead of the official 9.51%.
Since the start of the recession in December 2007, the number of workers who are officially unemployed has increased by 7,188,000, while almost twice as many workers - 13,290,000 - have become effectively unemployed. And all the while, we should have been creating around 2,250,000 new jobs (i.e., 18 months times 125,000 jobs per month) just to keep up with population growth.
In June, the number of workers officially unemployed increased 218,000, while the number of workers effectively unemployed actually decreased 35,000.
It's important to see the entire picture of America's jobs profile -- no matter how unpleasant.
I recognize that credit bubble related recoveries are hard to work out and are usually quite slow -- with job growth at the back end. This all makes sense -- but with Christina Romer out raising expectations again with giddy talk predicting a V-shaped recovery and given the "jobs, jobs, jobs" mantra of President Obama himself -- the gap between the job figures expected and the disappointing economic realities generated may be politically consequential.
-- Steve Clemons directs the American Strategy Program and Smart Globalization Initiative at the New America Foundation and publishes the popular political blog, The Washington Note
The way unemployment is reported is just another lie in the mountain of lies that is burying us.
History will attribute the failure of this country to a degree of deception never before seen in all of time. And will be all the more notable because all the while the truth was right in front of us.
July 2, 2009 11:28 AM | Reply | Permalink
Unemployment reporting, much like inflation reporting, is designed to smooth the curve and keep people's hair from spontaneously combusting.
July 2, 2009 1:57 PM | Reply | Permalink
Luckily I don't have much hair anymore. Of course, there is still a lot of stuff that burns my ass.
July 2, 2009 4:27 PM | Reply | Permalink
Roubini thinks official unemployment will peak at 11.4 or 11.5% in late 2010 - which means real unemployment will top 20% - and everyone agrees recovery will be very, very slow. In other words the country will have to live with an unemployment rate of around 20% for a long, long time.
The situation seems to be the same in Europe, although I can't be sure. Their official unemployment rate matches ours but I don't know the figures for real unemployment. Ditto Japan.
I can't see how the United States can recover. Our high end earners will do just fine as they are in demand all over the world and can freely move their assets. But for the rest? Disaster. Our unskilled cannot compete with cheap labor elsewhere and middle class jobs are heading that way.
July 2, 2009 11:45 AM | Reply | Permalink
1. The "unofficial" employment figures are an artefact. In the 1990's and the first part of this decade labor force participation rose because salaries were high and work readily available to anyone with a brain and fingers. Or even one of the above.
Now, with salaries down and no on hiring, the labor force has shrunk again, because many of these marginal and marginally interest workers have returned to whatever they did before: caring for children, retirement, what have you. The "unofficial" employment figures are basically a statistical scam.
The concern going forward is what "unofficial" cites: Not a lack of employment but a continually increasing education/status premium as the United States competes more evenly with the rest of the world. To prevent this, we need better higher education, and lower expectations.
Unskilled workers in the United States can't expect the productivity of other workers to buy them First World salaries anymore. Get some training or accept that you aren't more valuable than an unskilled worker in Mexico, Canada, or China.
July 2, 2009 12:53 PM | Reply | Permalink
Maybe once they sign enough unemployment extensions we will just 'end unemployment as we know it" and call it welfare.
July 2, 2009 1:18 PM | Reply | Permalink
It's important to keep "underemployment" in mind (I find the word "underemployment" a bit fuzzy, but at least I think everyone who uses it means pretty much the same thing). However, I think it is also important not to count underemployment as unemployment, because it is not. For instance, suppose that on average, the underemployed are at half-time (or the equivalent) instead of full-time. Should half of them somehow magically gain "full employment" in other jobs, the other half could then suddenly become full time without changing jobs, simply by filling in the time now available because the other half disappeared into new jobs.
Thus, if the "underemployment" is at 10% but the "underemployment rate" is 50% (half time), the effective unemployment rate increase should be 50% of the 10%. This would raise the actual unemployment rate from "around 10%" to "around 15%" (instead of "around 20%"). Still bad, to be sure, but not as bad as 20%.
Of course, I don't know the "underemployment rate" in the first place, hence have no idea what sort of scaling factor to apply. (And simple "hours worked" statistics don't tell the whole story anyway, since part-time employment tends not to confer benefits that full-time employment tends to confer. Personally I'd like to see the biggest full-time perk—health insurance—replaced with real health care, which would help get rid of a lot of the statistical distortion too, but that's another thing entirely.)
July 2, 2009 1:50 PM | Reply | Permalink
I don't think you're quite grasping the reality of the half-timers, as you call it. I was stuck in that cycle in the early 90s, when I couldn't find a full time job and my part time employer wouldn't make me full time.
When an employee leaves to take a full-time job, the part-timer doesn't take over the extra workload. They just hire another part-timer. Part time labor is cheaper than full-time labor because it has fewer (if any benefits). For example, my job at the time was for a 17.5 hour a week job. Most of the time I worked anywhere between 25 and 35 hours. But when I took a paid day off, like July 4th Holiday, I was only paid for 17.5 hours. Toward the end, they dropped it to 12 hours.
In a booming job market, it is difficult to find people who will work under these conditions, but in today's job market, as in the early 90s, people feel lucky to have a job at all. It took me three months and two interviews to get that stinking part-time job, because there were thousands of people in line trying to get it.
July 2, 2009 2:06 PM | Reply | Permalink
I did take both of those into account: I noted that you can't just go by hours because of the lack of benefits. Also, as you say:
so perhaps the "scale factor" (to apply to underemployment) is also dependent on the full-time-employment rate.The point remains that underemployment is not as bad as unemployment (or should not be; not everyone correctly factors in his or her own cost of getting to work, and hence quits the part-time job that turns out to be a money drain overall). (Note that these costs may include things like obtaining day care for children. Employer-provided day care is another one of those perks generally limited to full time employees, if it is available at all.)
July 3, 2009 1:25 AM | Reply | Permalink
As I say again...
The stimulus/bail-out really only helped the rich and investor classes. Nothing is being done to help the unwashed peasants.
We aren't even gonna get a break on our health insurance. We are losing our jobs and gonna be paying more so the well off can keep on being so. I guess nothing can be done to help the rest of us.
Yeah, nobody wants to hear all this class warfare stuff especially after the war has ended and the rich have won yet again. Same old, same old, same old, ad infinitum...
July 2, 2009 7:18 PM | Reply | Permalink
Peasants? Or pissants?
We iz revolting
July 2, 2009 7:32 PM | Reply | Permalink
whaddya mean nuthin'?
You can carry your loaded weapon openly in National Parks now, thanks to the recent add on to the budget bill. Can't put a price on that, or I guess you can, it cost nothing and is worth nothing to anyone but gun wacko's.
July 2, 2009 7:43 PM | Reply | Permalink
Either or...
We most certainly are Bwak, we most certainly are...we must be very revolting.
July 2, 2009 7:41 PM | Reply | Permalink