The Misleading Jobless Rate

Wednesday, March 05, 2008 | 11:27 AM

We have NFP for February getting released Friday, and in light of that, I want to direct your attention to David Leonhardt's very interesting article in today's NYT. He covers a subject we have discussed around here ad nauseum: The Misleading Jobless Rate.

Over the years, TBP has looked at the Augmented unemployment rate, as well as the NILF issue (Not In Labor Force).

Unemploymenttlarge Here's the money quote:

Over the last few decades, there has been an enormous increase in the number of people who fall into the no man’s land of the labor market that Carroll Wright created 130 years ago. These people are not employed, but they also don’t fit the government’s definition of the unemployed — those who “do not have a job, have actively looked for work in the prior four weeks, and are currently available for work.”

Consider this: the average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s. Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II. In January, almost 13 percent of prime-age men did not hold a job, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968. (emphasis added)

How are these seemingly inopposite data sets co-existing? Leonhardt

There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.

If growth in this group were the reason for the confusing statistics, we wouldn’t need to worry. It would be perfectly fair to say that unemployment was historically low.

The second possible explanation — a jump in the number of people who aren’t working, who aren’t actively looking but who would, in fact, like to find a good job — is less comforting. It also appears to be the more accurate explanation.





Source:
Unemployed, and Skewing the Picture
David Leonhardt
NYT, March 5, 2008
http://www.nytimes.com/2008/03/05/business/05leonhardt.html

Wednesday, March 05, 2008 | 11:27 AM | Permalink | Comments (53) | TrackBack (2)
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» More on Unemployment Rates from The Big Picture
Over the past few days, we've been discussing job creation and the various ways to think about unemployment. This has been a long standing theme around here (Augmented unemployment rate, as well as the NILF issue -- Not In Labor Force). See the list at... [Read More]

Tracked on Mar 6, 2008 10:13:44 AM

» Jobless vs. Unemployed from The Big Picture
In today's NYT, Floyd Norris hits on a subject that has been a favorite of ours over the years: Finding the true measure of the economy's labor situation.The unemployment rate is low. The jobless rate is high.Those two seemingly contradictory statement... [Read More]

Tracked on Apr 12, 2008 9:24:37 AM

Comments

This is my situation exactly. I have both BS and MA from very fine schools, have 6 years of corporate work experience and as many working for myself. I can't find a job!!! Most of the jobs that I find for which I am qualified pay what I was making nearly 10 years ago at my first position. So, I am a stay at home dad for now. I would love to work, but I am not going to work 70 hours a week for a salary that when divided out for an hourly calculation pays what Fast Food Joint pays! Then I have to find day care and pay for $ gas. It is very frustrating. When housing has doubled, gas is outrageous, food is a fortune and the salaries are exactly what they were 10 years ago? What the????

Posted by: Matt | Mar 5, 2008 11:39:59 AM

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