Reasonably Thinking

On Friday, September 4, 2009, the Bureau of Labor Statistics (BLS) published its most recent (monthly) Employment Situation.  Headline unemployment turned back higher, from 9.4% to 9.7%; nearly 15 million people are unemployed.

http://www.bls.gov/news.release/empsit.nr0.htm

Digging into the data a little further, the situation is more dire than this.  The unemployment rate is calculated by the number of unemployed people divided by the number of people in the work force.  Simple enough, right?  However, “unemployed” and “work force” are terms that have been massaged by electoral seekers…

• Example 1)  If you lose your job and decide to take a part time job (think bartending, flipping burgers) to help pay the bills, you are considered employed.  Even if you work a measly five hours a week in a grossly underemployed position, you are not considered unemployed.  Here the BLS would categorize you as “Working Part Time for Economic Reasons” (Table A-5).  There are over 9 million people in this category.
• Example 2)  If you are unemployed for 27 weeks or more, you are no longer considered in the work force (Table A-9).  How convenient?  There’s this group of 5 million people that are not working, but to the government, they are not unemployed.
• Example 3)  If you looked for work in the past 12  months, but not in past month, and are willing and able to work, then you are considered “Marginally attached to the workforce” (Table A-13).  Again, this is another 2.3 million people who are not working, yet massaged out in their separate category as to be excluded from the unemployment rate.

Reasonably thinking, an alternative measure of labor underutilization would be to add back these three categories to both the unemployed number and to the workforce number (Table A-12, row U-6).  This rate is referred to as the all-inclusive unemployment rate.  When taking the massage oil away, we see that the number of people unemployed (or underemployed for economic reasons) is more than double the headline unemployment number, at 31.3 million.  In August, the all-inclusive unemployment rate continued its ascent and is now 16.8%.

Now, for kicks and giggles, let’s view this in historical context. The Great Depression had peak unemployment of about 25% in 1933. Yet, unemployment measurements for the 1930s were more all-encompassing than they are today; this is an apples-to-oranges comparison. However, using today’s all-inclusive unemployment rate (16.8%) with the 1930s unemployment rate is more of a clementines-to-tangerines comparison. Our 16.8% unemployment is quitely approaching the 25% Great Depression peak. An article further explaining the parallel can be found here.