Interpretting Unemployment Rate

[TromboneAl]

The news shows long lines at unemployment offices and at job fairs. It seems like everyone knows someone who is out of work.

The current employment rate is 8.1% and eyeballing this chart of past unemployment rates, it seems that the average unemployment rate is about 6%.

So, about 2% more people are unemployed than usual. 2% doesn't seem like that big of a number to me. If I were looking for a job, having 2% less of a chance of finding one wouldn't seem like a big deal.

Am I misinterpreting this?

 

[ziggy29]

So, about 2% more people are unemployed than usual. 2% doesn't seem like that big of a number to me. If I were looking for a job, having 2% less of a chance of finding one wouldn't seem like a big deal.

Am I misinterpreting this?

Not entirely, but a couple things are worth nothing:

* There's widespread skepticism about how unemployment statistics are calculated. The headline figure of 8.1% significantly undercounts the number of people who don't have full time employment but are seeking it.

* The *rate of change* of the unemployment rate over the last year (and particularly the last 5-6 months) is virtually unprecedented. The velocity with which jobs are being lost is creating a panic, even among many of the still-employed.

 

[Meadbh]

If the average unemployment rate is 6%, and it's now 8%, that represents an increase of one third in the number of people unemployed, not so?

 

[ziggy29]

If the average unemployment rate is 6%, and it's now 8%, that represents an increase of one third in the number of people unemployed, not so?

That's the other thing. The chances of finding another job are not only 2% lower.

Even if you look only at the people counted in the 8.1% unemployment number (which way undercounts the actual number looking), you have 1/3 more people out of work looking for jobs.

And because of job cuts, job-hoppers afraid to move, older folks who can't retire because of the crummy market, the number of job openings has cratered.

And then if you add the "uncounted" unemployed back in (including underemployed part-timers and retired folks needing to go back to work), and you have a huge increase in job seekers at a when the number of jobs available in most fields are extremely small.

 

[TromboneAl]

OK, makes sense, thanks.

 

[Meadbh]

And then if you add the "uncounted" unemployed back in (including underemployed part-timers and retired folks needing to go back to work), and you have a huge increase in job seekers at a when the number of jobs available in most fields are extremely small.

And don't forget that unemployment is a lagging indicator. When the economy turns around, the people who aren't even bothering to register will come out of the woodwork and there may be a temporary spike in unemployment.

 

[FIREd]

The official unemployment numbers don't nearly capture the full extent of the current job downturn. People who stop receiving unemployment benefits fall off the radar screen for example (whether they found another job or not) so long term unemployment is probably underreported. The engineer who used to make $100K and is now making minimum wage at McD (while he waits for another engineering job) is considered "employed" too. And I don't think that the numbers account for people, like new graduates, who can't find their first job or people, like SAHM and retirees, who would like to start working again after a long hiatus. I think that some segments of the population are under-represented in the unemployment numbers, such as immigrants whether legal or illegal, because some don't qualify for unemployment benefits and therefore don't bother to register as unemployed (plus illegals are often too afraid to come out of the shadows and deal with government officials). Then there are people who for ideological reasons refuse to register to receive unemployment benefits because they feel ashamed to be the recipients of "welfare". The working poors, those who have full-time jobs but still don't earn enough to afford the basics are also considered "employed" as well.

I think the real unemployment rate is much, much higher than 8.1%.

 

[RonBoyd]

Last week there was a good article on this in the NYTimes

Job Losses Show Breadth of Recession

pointing out that the 8% figure is a national average, there are many places where it is in the upper teens.

see interactive graphic.

Geography of a Recession

 

[RonBoyd]

Four states' unemployment rates above 10%

Wednesday's report shows jobless rates in several states soared in January, with four surging through the double-digit percentage level. Michigan, South Carolina, Rhode Island and California led U.S. jobless rates