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A better look at the jobless rate and how it compares to the levels hit in past recessions

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January 21, 2009 – Comments (4)

 

Anyone who reads my blog knows that I find the unemployment numbers that are reported by the BLS to be completely absurd.  They significantly understate the actual rate of unemployment for a variety of reasons, including nonsensical seasonal adjustments and the absurd birth / death model. 

Several years ago the BLS responded to some of the criticism that it receives by publishing a series of less publicized statistics that provide a wider look at the jobless rate.  This more accurate read on the jobless rate includes people who want full-time work who have been forced to work-part time and those who have completely given up looking for work.  The BLS' official data for this wider definition of unemployment only goes back to 1994, but it recently provided David Leonhardt of the New York Times with an estimate of what this data series would look like all the way back to 1970 (see article: The Economy Is Bad, but 1982 Was Worse).

The awesome charts that I linked above show that the jobs situation still is not as bad as it was back in the recession of the early 80s.  The current unemployment rate using this wider definition is 12.8%.  This is still below the estimated rate of 16.3% that was reached in 1982.

Anyhow, the charts are interesting.  I personally expect the jobless rate in the U.S. to eventually exceed the '82 level, but not to be anywhere near the estimated 30% level that was hit during the Great Depression.

Deej

4 Comments – Post Your Own

#1) On January 21, 2009 at 6:00 PM, awallejr (77.67) wrote:

Interesting chart.  Time, of course, will tell, but another factor to consider is the aging factor where the boomers are starting to hit retirement status.  There actually may become a shortage of workers down the road (10 year horizon tho).

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#2) On January 21, 2009 at 8:09 PM, angusthermopylae (40.11) wrote:

I've been following (and agreeing with) your take on unemployment numbers for a while--esp. when considering how the numbers are massaged.

awallejr could be correct; 5-10 years from now, the whole situation could reverse.  You never know.

To pull in another debate, how would unemployment be affected by inflation/deflation?  If actual wholesale inflation, my guess would be longer unemployment because each additional worker would cost significant $$ to the employer...they would want to do more with less.  But the number could still lie because having a job doesn't mean you can make enough money to survive...so you have to have more than one.   Call that "functionally unemployed," as in you've got a job but you're still starving.

OTOH, if real deflation settles in, could it help unemployment figures?  A conditional "yes", imho, if enough of the economy deflates to where lower wages don't mean you are still functionally unemployed.

...makes my head hurt, trying to figure all the angles....

Well, when in doubt, just remember that figures lie and liars figure....

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#3) On January 22, 2009 at 12:27 AM, Tastylunch (29.40) wrote:

but not to be anywhere near the estimated 30% level that was hit during the Great Depression.

Even If it does hit 30%, I'm sure the BLS will never call it that anyway.

The greatest job losses in this downturn I think are the loss of second jobs, a lot of more americans basically had three income situations(boh spouses work oustside the home with one of the spouses with two jobs) that weren't reported/covered by the numbers.

Let's say it does get above 20%, I also think you may see New Deal esque programs to address unemployment as well.Unemployment that high for long puts real stress on the social contract here. You can bet you last buck that Obama will pull out all the stops before letting it get that bad. The government's very survival may depend on it.

 30% unemployment is not an impossibilty but there are many more societal/political milestones to pass (that are frankly more worrisome than the unemployment) before seriously thinking we are going there. I think that's a key factor that's missed in most of the unemployment hysterics I've seen on CAPS and elsewhere.

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#4) On January 22, 2009 at 5:06 AM, uclayoda87 (29.35) wrote:


OPINION: DE GUSTIBUSJANUARY 9, 2009 'Atlas Shrugged': From Fiction to Fact in 52 Years By STEPHEN MOORE

...One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

Mr. Obama may be a very smart politician, but does he have the courage to make the unpopular decisions needed to correct this financial mess?  There are no charts or grafts or magical equations that will correct this financial misadventure.  But if he appoints Peter Schiff to be the new Economic Dictator we might have a chance to see "Real Change!"

 

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