In response to the latest unemployment numbers, I’m seeing people still wondering how the unemployment rate can go down if people stop looking for work. Way back in February 2010, I made a short video explaining the phenomenon of “discouraged workers” (although I never got into how one is considered part of the labor force). If you can stand the poor audio and video quality, it’s still accurate:
I taped that shortly before my second son was born. With my older boy now into superheroes and Legos, I have much more fun little figures to use if I ever do demonstrate how people depart the labor force.
I love the idea of a category defined as "discouraged". Added to the list "created or saved," it says a lot about the mendacity of this administration -- and their stupidity.
I did some polynomial regressions earlier today of labor force participation rate against unemployment rate and time to try to establish whether the participation rate is unusually low for the level of unemployment we have now -- i.e., is today's real unemployment rate worse than it usually is when the reported number is 8.6%?
Depending on which specification I used, I found that the participation rate is either somewhat lower or roughly the same. If I include data since 1948, I get that today's participation rate should be a lot higher than it is. If I cut it at 1980 to avoid leaning too much on my time variables to capture economic change, it should be a little bit higher than it is. If I cut off at 1970 and remove unemployment rates below 7.2%, such that I'm not fitting my data to time periods with low unemployment rates, I again find that the participation rate should be slightly higher than it is - that our 8.6% unemployment is comparable to earlier 8.8% or 8.9% unemployment rates.
What's more worth noticing is that two or three years ago, when the unemployment rate was in the mid-8s on the way up, the participation rate was unusually high. So on a longer-term historical basis, real unemployment is only a little bit worse than it usually is when the reported number is 8.6, but real unemployment is about a percentage point worse than it was when the reported number was 8.6 in early 2009 (I think March of 2009).
This still ignores other factors like how long the unemployed have been unemployed, but if you've wondered how big an issue the discouraged workers are relative to usual, there you go.
It's still accurate. But after two more years of Obama, Jim, you're going to need those additional toy figures of your son's to represent the additional people who have given up trying to find work, or to represent the jobs deliberately destroyed by his administration.
That's why I always double the figures from the government. I think it was in the Wall Street Journal that that unemployment has lowered to 8 point something%. So in reality the real rate is 16%. So that means,,,, that until recently the real rate was nearly 20%! No wonder people are discouraged. Many likely have applied for every job they are qualified for.
I think plenty of unemployed realize that the rate isn't going to fall much until Obama is out of office. They know that the White House has things far more "important" then the economy on its plate. When Obama doesn't even want to make a easy decision like the oil pipeline, you know that he doesn't care one bit about the economy and the unemployed.
Hilarious, truly. As David Burge noted, Obama should hand out "Non-participation Awards" to labor force drop-outs.
Reply to this commentLinkReport AbuseI love the idea of a category defined as "discouraged". Added to the list "created or saved," it says a lot about the mendacity of this administration -- and their stupidity.
Reply to this commentLinkReport AbuseWere you on an airliner at the time? It sounds like jet engines revving in the background.
Reply to this commentLinkReport AbuseI did some polynomial regressions earlier today of labor force participation rate against unemployment rate and time to try to establish whether the participation rate is unusually low for the level of unemployment we have now -- i.e., is today's real unemployment rate worse than it usually is when the reported number is 8.6%?
Depending on which specification I used, I found that the participation rate is either somewhat lower or roughly the same. If I include data since 1948, I get that today's participation rate should be a lot higher than it is. If I cut it at 1980 to avoid leaning too much on my time variables to capture economic change, it should be a little bit higher than it is. If I cut off at 1970 and remove unemployment rates below 7.2%, such that I'm not fitting my data to time periods with low unemployment rates, I again find that the participation rate should be slightly higher than it is - that our 8.6% unemployment is comparable to earlier 8.8% or 8.9% unemployment rates.
What's more worth noticing is that two or three years ago, when the unemployment rate was in the mid-8s on the way up, the participation rate was unusually high. So on a longer-term historical basis, real unemployment is only a little bit worse than it usually is when the reported number is 8.6, but real unemployment is about a percentage point worse than it was when the reported number was 8.6 in early 2009 (I think March of 2009).
This still ignores other factors like how long the unemployed have been unemployed, but if you've wondered how big an issue the discouraged workers are relative to usual, there you go.
Reply to this commentLinkReport AbuseIt's still accurate. But after two more years of Obama, Jim, you're going to need those additional toy figures of your son's to represent the additional people who have given up trying to find work, or to represent the jobs deliberately destroyed by his administration.
Reply to this commentLinkReport AbuseThat's why I always double the figures from the government. I think it was in the Wall Street Journal that that unemployment has lowered to 8 point something%. So in reality the real rate is 16%. So that means,,,, that until recently the real rate was nearly 20%! No wonder people are discouraged. Many likely have applied for every job they are qualified for.
I think plenty of unemployed realize that the rate isn't going to fall much until Obama is out of office. They know that the White House has things far more "important" then the economy on its plate. When Obama doesn't even want to make a easy decision like the oil pipeline, you know that he doesn't care one bit about the economy and the unemployed.
Reply to this commentLinkReport Abuse