A Tale of Two Lines

June 5, 2012

A colleague asked me “Why am I standing in line at the restaurant if there are so many in the unemployment line?”

I told him that we were standing in line with the 91.7% of the folks who are employed, not the 8.3% who are unemployed (U-3 unemployment measure).

I should have told him that we were standing in line with the 85.2% of folks who are fully employed, as opposed to the 14.8% who are not (U-6 unemployment measure).

Blue line indicates those of us who are standing in line at Applebees, Red line indicates people suffering from the “jobless recovery.”

The blue line shows the average number of hours worked by people with jobs in the private sector. It shows that those of us who are working are doing fine.

The red line in the chart below is a monthly index of the employment-to-population ratio, normalized to a value of 100 in December 2007, when the recession began. The lack of an uptick in the redline since 2009 is, we think, the essential tale.

Regardless of how one chooses to explain it, the fact that it has not improved is the critical issue.

We recall Dicken’s opening line from A Tale of Two Cities:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

Sobering fact: Long term unemployment, defined to be 27 weeks or more out of work climbed to  5.4 million, or 41.3% of unemployed(U3) people.

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About That Unemployment Rate…

February 8, 2012

Why don’t things seem better- the news says the unemployment rate fell to 8.3 per cent?

This line only shows the folks counted in U-3...

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The unemployment rate they talk about in the press is the U-3 rate. The unemployment rate that the people in the country are really feeling is called the U-6 rate.

The U-6 rate includes the unemployed, the marginally attached, and persons who are actually employed but who work fewer hours than they would like.

While that  8% rate may sound like a real improvement,  the fact is that in human terms, not filtered through the  rose-colored lens of policy wonks or reporter-speak, the real rate is U-6 or almost double the “official” U-3 rate.

Critical thinking is about recognizing and challenging assumptions. What assumptions are built into the people talking on TV about unemployment?

As this graph shows, one assumption is that they aren’t even talking about darn near half the people who are “unemployed, marginally attached, and persons  who are actually employed but  who work fewer hours than they would like.”

How about that unemployment rate?

Graph


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