Jobless vs. Unemployed
In today's NYTimes, 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 statements are especially true for American men in what should be the prime of their working lives. Those facts may help to explain the stark pessimism of Americans about the economy, and shed some light on the rise of illegal immigration as a political issue."
How is that possible? The two different rates measure two very different things:
"The unemployment rate paints a less gloomy picture. Among men ages 25 to 54 — a range that starts after most people finish their education and ends well before most people retire — the unemployment rate is 4.1 percent. That is not especially low, but it is well below the peak rate in all but one post-World War II recession. Only people without jobs who are actively looking for work qualify as unemployed in the computation of that rate. It does not count people who are not looking for work, whether or not they would like to have a job.
But there is another rate — called the jobless rate in this article — that counts the proportion of people without jobs. To be sure, some of them do not want to work. Some are raising families on a spouse’s income, or are disabled, retired or independently wealthy. But others may be discouraged workers, who would take jobs if they thought any desirable positions were available.
So how bad is the "Jobless" rate? How about the 2nd highest sinbce WWII:
In the latest report, for March, the Labor Department reported the jobless rate — also called the “not employed rate” by some — at 13.1 percent for men in the prime age group. Only once during a post-World War II recession did the rate ever get that high. It hit 13.3 percent in June 1982, the 12th month of the brutal 1981-82 recession, and continued to rise from there.
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A Tale of Two Rates
chart courtesy of NYT
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Good stuff, Floyd.
>
Previously:
The Misleading Jobless Rate (March 2008) http://bigpicture.typepad.com/comments/2008/03/the-misleading.html
A Closer Look at Unemployment (September 2007)
http://bigpicture.typepad.com/comments/2007/09/a-closer-look-a.html
Unemployment Levels and Labor Participation Rate (February 2006) http://bigpicture.typepad.com/comments/2006/02/unemployment_an.html
Unemployment vs Underemployment (July 2004) http://bigpicture.typepad.com/comments/2004/07/unemployment_vs.html
Chart of the Week: Augmented Unemployment Rate (January 2004) http://bigpicture.typepad.com/comments/2004/01/chart_of_the_we_2.html
>
Source:
Many More Are Jobless Than Are Unemployed
Floyd Norris
NYT, April 12, 2008
http://www.nytimes.com/2008/04/12/business/12charts.html
Saturday, April 12, 2008 | 09:22 AM | Permalink
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Comments
The Financial sector will contribute to the jobless rate for a long time.
I have posted a chart illustrating the ratio of employment in the financial sector relative to natural resources.
This ratio moves in harmony with the financial markets.
In periods of high inflation, the ratio declines as markets experience a contraction in P/E.
See
http://wrahal.blogspot.com/2008/04/tangible-vs-finacial-assets-part-two.html
Posted by: Will Rahal | Apr 12, 2008 9:52:36 AM
The most interesting thing to me in the associated graph is the gap between the Jobless rate and the Unemployment rate.
The gap between the two rates reflects those people who are jobless and were unable to find a suitable job while probably drawing unemployment pay and have subsequently been purged from the system.
In other words, they are still jobless but are no longer eligible for unemployment benefits, so they just fall off the unemployed rolls (whether they ever actually get a job or not).
In short, the gap between the two rates has been widening since around 1983; which means fewer and fewer people are actually finding new jobs. In addition, the rate of widening is increasing.
There is more than lost productivity and lost opportunity when large numbers of healthy, otherwise capable people remain jobless. The crime rate increases in some cases dramatically(probably at the same rate of divergence as in the graph above).
This adds another social cost: a larger police force, social welfare, etc. So instead of having a productive, tax-paying citizen, you now have a disallusioned/disgruntled person just trying to survive; who may well end-up incarcerated; which is yet another BIG social cost.
Employed people contribute to the social coffers. Jobless people drain social coffers in a myriad number of ways.
Posted by: BG | Apr 12, 2008 9:58:29 AM
If you've been out of work for more than a year then you are most likely unemployable because recruiters don't want to represent you and employers don't want to interview you. It's like that punchline where the farmer says to the lost city dweller "You can't get there from here"
What has happened to the American worker in this country for the last ten years is criminal.
Posted by: Mr Reality | Apr 12, 2008 9:58:47 AM
Barry,
Do you think it is a good idea to bet against G-7?
Just curious about your opinion.
Thanks
http://biz.yahoo.com/ap/080411/credit_crisis.html
~~~
B: I hadn't really thought about it.
In what way to you mean bet against the G7 ?
Posted by: Alex | Apr 12, 2008 10:02:57 AM
Posted by: BG | Apr 12, 2008 9:58:29 AM
I noticed that, too.
Fairly discouraging to be educated, or even highly educated, and not able to find a job better than unskilled labor. With our guest workers heading for greener pastures, we will learn the difference between "jobs Americans won't do," and "jobs that don't pay enough for Americans to do."
A green lawn is fixin' to cost a lot more.
Posted by: Marcus Aurelius | Apr 12, 2008 10:12:45 AM
Please don't overlook the fact that there is a large segment of the population that is "unemployable". They lack the necessary social skills, work ethic and training to make them worth hiring. This is especially true in light of the EEOC exposure, worker's compensation claims, etc. that tend to be higher from such people. This is basically one reason employers have been forced to rely upon legal and illegal immigrants to keep their businesses running. A close look at the carpet industry in Dalton, Georgia will show you the actual facts.
Posted by: David | Apr 12, 2008 10:13:23 AM
How is the jobless compiled?
As someone who runs my own company and is the sole employee of that company I am ineligible for unemployment benefits (can't lay off myself) so when I wasn't working in January do not being able to find contracts (which is not at all unusual for what I do) - exactly which statistic counted for me? I suspect neither.
Posted by: yoshi | Apr 12, 2008 10:17:05 AM
Posted by: David | Apr 12, 2008 10:13:23 AM
EEOC exposure, worker's compensation claims, etc. that tend to be higher from such people. This is basically one reason employers have been forced to rely upon legal and illegal immigrants to keep their businesses running.
____________
Employers haven't been "forced" to break the law to save their businesses. The employers have used their ill gotten profits to line their own pockets. The income disparity in this country could have been used to feed the system - sacrificing windfall prices and political instability for reasonable profits and stability.
If they can't make a buck legitimately, perhaps it's the employers who should be scrubbing toilets.
Posted by: Marcus Aurelius | Apr 12, 2008 10:21:01 AM
BG wrote,
"....those people who are jobless and were unable to find a suitable job....have subsequently been purged from the system."
Purged - what a good, Soviet-style word.
"In short, the gap between the two rates has been widening since around 1983;"
What a coincidence - the 1980's delivered the birth of the FIRE economy to the U.S.
And since then, real jobs have declined - tell me it ain't so....is it just me, or does that trickle down have a familiar, slightly pungent odor to it?
Posted by: Winston Munn | Apr 12, 2008 10:26:49 AM
Yeap. I agree. There are some people that are just plain sorry! However, there are a lot of jobless people who just need a chance at a "good" job, not just a string of ratty jobs.
You know there was a time when the employer would (religiously)TRAIN their employees the "Company way" of doing things. That provided consistency, quality-of-work and continuity for their brand. They would never consider having a "loose cannon" running around.
Now, Companies are no longer willing to comit to the cost of training employees and expect you to know everything needed on the job when coming in. In essence, even those jobs still in this Country have already out-sourced a lot of the intelligence and know-how required to do the job!
In short, management no longer knows the inter-workings of their own business; but instead only know those contract workers or companies that offer the cheapest rates. As a result, young people have absolutely no loyalty to the Company they work for....for very good reason.
It's really a sad situation. It all revolves around the dollar right this instance and to hell with any subsequent consequences tomorrow.
Winston Munn:
You are correct. The plans for the great American outsourcing started in 1980 and began in earnest in 1983. I'll let you connect the dots.
Posted by: BG | Apr 12, 2008 10:36:45 AM
finally. now i'd like to see the same jobless #s plotted for the anti-capitalist social welfare states of EU. see how we're doing. i expect before long we'll be quarantined by all right-thinking countries as a serial currency-debaser, polluter, war-monger and promoter of poverty-making labor and health standards.
Posted by: scorpio | Apr 12, 2008 10:48:06 AM
Marcus Aurelius wrote:
"The income disparity in this country could have been used to feed the system - sacrificing windfall prices and political instability for reasonable profits and stability."
I say, Amen Brother!
Posted by: BG | Apr 12, 2008 10:48:53 AM
Let's see, 4 years of grad school, a couple interviews and one offer of $30K from fucking Lockheed, after IBM sent my job to India, and David thinks I am "unemployable".
Obviously he has his head in the sand. The people I know get fired in their mid-50s and they don't get comparable jobs. yet idiots like David and Oracle say there are 1000 jobs that NO Qualified person, out of 300 million people, can do, other than cheap Indian imported labor.
Funny how supply and demand never gets to the employer side of the equation. But I can tel you think, I did not spend years on an education to give it away.
Does this make the US better off?
Posted by: me | Apr 12, 2008 11:03:23 AM
1. On Friday, everything was set for the bulls until GE bomb dropped.
2. GE missed because the credit markets were frozen at the end of March (according to GE CEO, I doubt he was lying); as a result, GE could not sell the paper before the end of last quarter (end of March)
3. Credit markets hysteria (overreaction) is at the center of our current problems (not to minimize the housing problem)
4. G-7 members are committed to unplugging the credit markets at any cost. If they successful, GE (as one example) sells what they could not sell and record an upward earnings surprise during this quarter.
5. I am also suspecting G-7 members were exerting pressure on the Bush administration to fix the housing problem (at least freeze the rate of foreclosures) and to prop up the dollar.
In short, you would need to bet against G-7 efforts now if you short this market (keep in mind that the market has already dropped 10-15% from its peak, it is not near all time high)
Please give an honest looking at both sides answer (not Floyd Norris’ political spin), examining both possible scenarios (bullish vs. bearish).
American media is extremely political, the heads on TV talking their books, everyone is spinning and it is impossible to get the truth from them (please do not do the same).
Thanks
Posted by: Alex | Apr 12, 2008 11:09:44 AM
In the 80's and 90's when I was enjoying a career as a software engineer I recall hearing the talking heads on TV lecturing factory workers whose jobs were sent overseas to retrain as programmers. Now that programming jobs are being sent overseas the talking heads seem to be out of helpful suggestions. I guess becoming a realtor would have been a good idea a few years ago. Not so much now.
To David, Mister "Unemployed people are lazy", if something bad should happen to you I hope you remember it is because you are a lazy person and just aren't motivated enough to go out and make good things happen to you.
Posted by: LostInAmerica | Apr 12, 2008 11:17:50 AM
I am going to throw a curveball into the argument: I'm in my early 30's and among men in my cohort, it has been inceasingly popular to become stay at home dads or house husbands. I know many, actually too many, in my opinion, men, educated and able-bodied, who would rather not be out in the workforce. This laziness and lack of ambition has propagated throughout the so called Gen-X mentality. I think it is pathetic.
Posted by: AJF | Apr 12, 2008 11:18:54 AM
Where are the women in all of this? What impact does the entrance of many more women in the workforce since WWII have on this historical data set?
Posted by: Eric | Apr 12, 2008 11:40:19 AM
Posted by: yoshi | Apr 12, 2008 10:17:05 AM
____
Good point.
Have you noticed the move (in tandem with the use of undocumented workers) to have employees rehired as "contractors"? Half the people I know are now contract employees or consultants. Their job remains the same.
Posted by: Marcus Aurelius | Apr 12, 2008 11:41:02 AM
The fact that this is only men makes me wonder what comparable total employment stats,(women included)looks like. Is it reasonable to ask if the large increase in female employment over these years mitigates the effect of rising joblessness of men?
Posted by: Thom H. | Apr 12, 2008 11:41:45 AM
Karl K. wrote:
"It's hard to know, frankly, the reasons........ is it a structural macroeconomic fact? or a personal one."
Well, we are both sure it is a mixture of both; however, the problem with the macro view is also well understood.
You will always have a huge disconnect when you have people in a modern society competing against people in a 3rd world country making $2 per day working in terrible conditions.
As mentioned earlier in this thread.....You can't get there from here!
People in this Country (employed and unemployed) have chosen to reap the fruits of exploited human capital in other parts of the world. You could argue the fact that very little has changed in this area for hundreds of years; while being characterized as a very honorable thing to do.
Posted by: BG | Apr 12, 2008 11:47:59 AM
I recently wrote an 8 page investigative report on math and science education in the US vs China vs India. Some highlights:
US is still the undisputed leader in the performance of basic and applied research and in applying research and innovation to improve economic performance.
38 of the world’s top 50 leading research institutions are in the United States. A tradition of public funding for research and our country’s diversity has lead to great innovation and prosperity. However, an astounding 55% of PhDs awarded in these US institues goe to foreign nationals.
India now exports over $10 Billion a year in software and IT services growing 28% annually.
IBM sold PC business to a Chinese company... is projected to have more than a quarter of its employees stationed in India by 2010.
U.S. share of global exports has fallen in the past 20 years from 30 to 17%, while the share for emerging countries in Asia grew from 7 to 27%. The U.S now has a negative trade balance for high-technology products.
Only 3% of African Americans, 4% of Hispanics, 20% of Whites and 34% of Asians in America are proficient in Math by 12th grade.
9
3% of high school science is taught by teachers who know little about their subjects.
100 million Chinese are studying English, yet only 50,000 Americans are studying Chinese.
Chinese students spend about twice as many hours studying per year than American students.
I recommend watching the documentary "2 Million Minutes" (see link for trailer)...very eye opening. If anyone is interested, maybe I could post my report somewhere or Barry could post it.
Posted by: Steve Barry | Apr 12, 2008 11:55:21 AM
Steve, that is very good stuff.
It reminds me of something I observed while waiting in a Doctor's Office. The TV was on the waiting room and I don't remember which network it was turned to; but, the piece was a comparison in the typical daily life-style of an American youth versus an Asian (Chinese, I think) youth.
Well, the Asian youth was diligently working on a difficult piece of music on a violin.
You know what the American youth was doing at the same time? Looking/primping in the mirror wearing a new pair of cheap sunglasses they had recently purchased!
WOW! That speaks volumes.
Posted by: BG | Apr 12, 2008 12:08:07 PM
"They lack the necessary social skills, work ethic and training to make them worth hiring."
This is nothing more than apologetics for outsourcing, both legal and illegal. I live on the north side of Atlanta, not much more than an hour away from Dalton, a town I have frequently travelled through and to during my life. Perhaps, David, you might oblige me by explaining exactly what's so special about the carpet mills there that the owners have been "forced" to break the law by hiring illegal immigrants? Further, perhaps you might explain how it is that illegal immigrants *possess* the requisite "social skills, work ethic and training" to make them "worth" hiring?
I can hardly wait to hear your exposition on those topics. Please, by all means, elaborate.
Posted by: Tarzan | Apr 12, 2008 12:08:58 PM
BG...yes...click on my link above...the video you described is from 2 Million Minutes. You can google it also and they have a cool website.
Our education system is clearly falling behind now. The Internet makes it possible to offshore high tech work at a fraction of the cost. The scary part is that if our engineers just kep par with China and India, they will be priced out of the job market by the cheaper global workforce. The storm clouds are gathering...
Posted by: Steve Barry | Apr 12, 2008 12:14:33 PM
What's interesting about the graph is that there appears to be a long term secular trend going on. If you look at it, you see that almost every recession causes a higher spike in the jobless rate, and that the lows between recessions are higher too. So something is happening, and it is a very long term process that starts in the 60's. What is it? That's the million dollar question.
I don't think the cause is primarily outsourcing, as this was't really a big factor in the 70's yet the jobless rate was already rising. Amazingly, the jobless rate in 1968 was less than 2 percent!
I suspect the answer is complicated, involving a change in cultural expectations about men and work, immigration, job losses, and the rise of women in the workforce.
I'd like to see the comparable graph for women the same age, as I suspect that one issue is that the U.S. does not have enough good jobs for men, women, minorities, and immigrants, and as the latter three categories of workers have increasingly moved into the workforce, white men have had to compete more. This is not necessarily a bad thing. But in looking at these types of "factoids", I think it is terribly important to look at the big picture! (pun intended).
Posted by: Andrew | Apr 12, 2008 12:26:11 PM
