Baseless optimism (below) vs. sure-thing Timesizing®
[Commentary] ©1999-2012 Philip Hyde, Timesizing Assocs, Box 117, Harvard Sq PO, Cambridge MA 02238 USA 617-623-8080 - HOMEPAGE

USA's supposedly "not-so-bad unemployment" (UE)
+see labor "shortage" & "classless society" (+how UE should be defined) +article 3/02-03/2014 #1 & for Canada, 2/07-08/2010 #1
First, note that a primary academic critic of the official unemployment (UE) definitions was Philip Hauser of the University of Chicago Sociology Dept. (*Social Statistics in Use, 1975, and especially his numerous articles). Then check out the back story on "the great American jobs machine" from a conservative publication. Then consider the true seriousness of a 5-6% UE rate today (see 11/28/2002 #1). Then consider this disclosure, "A shrinkage of nearly one million in the number of workers who are considered to be in the workforce was the main reason behind the decline in the jobless rate [from 5.8% in Dec/01 to 5.6% in Jan/02] even as the economy lost jobs" in "US jobless rate falls as economy sheds 89,000 jobs," Reuters 09:11 02-01-02 via AOLNews. Where did the people "shrunk" from the "workforce" disappear to? Note the bulge in America's new welfare program, disability, over the last 10 years (see 9/01-02/2002 #2) and, with the "coincidence" between the unemployment rate and the crime rate (see 10/29/2002 #4), note the recent bulge in America's prison population.  Next, check out some informative articles on the subject:-
  1. 11/07/2014 Don't believe the number? Consider the source, by Floyd Norris, New York Times, B1.
    [or online headline:] Doubting the economic data? Consider the source
    Paul Singer, a hedge fund billionaire, said many government statistics were fake, a report this week from Bloomberg News said. (photo caption)
    NEW YORK, N.Y., USA - The economic statistics are fake.
    [No just irrelevant.]
    There is no real economic recovery.
    [True. Ya cain't git upsizing (alias growth) by downsizing. And it's gettin' so extreem thet we're gittin' the truth not only "out of the mouths of babes and sucklings" but also out of the mouths of some of the bad boys themselves -]
    That refrain was heard in 2012, when Jack Welch, the former chief executive of General Electric, claimed that a reported decline in unemployment was “unbelievable.” He added, “These Chicago guys will do anything,” referring to the Obama administration.
    That came just before the election, in which voters returned President Obama to the White House.
    On the day of the midterm elections came the news that Paul Singer, a hedge fund billionaire and top Republican donor, thinks there is a lot of faking going on now. He sees economic disaster ahead.
    "Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth [except for him & the topmost brackets]," Mr. Singer wrote to his investors, according to a report by Bloomberg News.
    [It seems even Wall Streeters come up with truth if they can blame it on government.]
    A spokesman for Mr. Singer declined to confirm the report and said Mr. Singer would not agree to be interviewed.
    I cannot recall an economic recovery that was more widely doubted than the current one. On the left, the response has often been to cite statistics indicating that benefits have largely gone to the wealthy and not spread down the economic ladder. There is something to that, but it is always true that recoveries, like recessions, are spread unevenly throughout the economy.
    On the right, the claim has more often been that the numbers are manipulated by the Obama administration to fool the public.
    Is that true? I doubt it. The idea that politicians could force government bureaucrats to fake the statistics, and do so without any leaks, is hard to believe. Such a conspiracy, if it managed to exist for long, would be a marvel of organization. But those who believe in the conspiracy theory also tend to subscribe to the theory that governments are generally incompetent and unable to do anything right. Those two beliefs do not correspond.
    That is not to say that governments cannot lie about numbers. Greece used phony economic numbers to qualify for the eurozone. It is too bad for everyone, including the Greeks, that the deception succeeded. And the Soviet Union’s economic growth figures seem to have been considerably exaggerated. One reason may be that lower-level officials were under pressure to report good numbers to show they were doing a good job.
    Anyone who has ever studied corporate accounting frauds will recognize that problem.
    But the people who collect the figures that go into economic statistics are not under that pressure. They will not lose their jobs if the economic statistics look bad. They will lose their jobs if they do not collect enough data, and there have been cases where government interviewers were said to have faked survey responses to cover up the fact that they had not done enough work.
    Nonetheless, government statistics are often questionable and sometimes turn out to have been highly misleading.
    Unfortunately for policy makers, such errors are most likely to be severe at precisely the time that the economy is turning around. Estimates are included in most economic statistics, and those compiling the figures tend to assume that previous trends will continue. We now know the economy was much worse off in early 2009 than the economic statistics indicated at the time.
    By the time Mr. Welch voiced his doubts in 2012, the figures showed that a recovery, though not a particularly strong one, was underway. It turns out the numbers were wrong, but not in the way Mr. Welch believed. Employment was growing more rapidly than the initial figures indicated.
    The numbers on jobs and unemployment have become the most-watched statistics of this era, but they can be among the most confusing. That is because the figures come from two different surveys, each with its own problems. The job numbers come from a survey of employers. The unemployment numbers come from a survey of households. Sometimes they can radically disagree, with one survey showing an increase in employment and the other a decline.
    Both surveys have problems. The job numbers are revised twice after they are released, as late responses to the survey are tabulated. They include an estimate — known as the birth-death model — reflecting the number of jobs created at companies too new to be eligible for the survey and the number of jobs lost when existing companies go out of business.
    Then, more than a year later, the numbers are completely revised to reflect how many workers companies said they had when they paid premiums for unemployment insurance.
    Those revisions can be drastic. In the 10 months from April 2008 through January 2009, the current estimate is that the economy lost 1.9 million more jobs than the initial reports indicated.
    The 2008 Economy, Then and Now - As President Obama began his term in 2009, the economy appeared to have suffered much less than current figures now indicate. (graph caption)
    The figures in the household survey are rarely revised, but they are subject to significant sampling errors. For the total number of people working, the Bureau of Labor Statistics says that there is a 90 percent probability that the correct number is within 400,000 of the number reported and that the unemployment rate is within 0.2 percentage point of the reported figure. What that means in practice is that month-to-month fluctuations may be meaningless. To possibly make things worse, more people decline to be interviewed now than in years past. That may make the numbers less reliable than they used to be.
    The survey questions are complicated. It is not simply a matter of whether a member of the household was working during the week covered by a monthly survey. Was a person without a job looking for work? If so, that person is counted as unemployed. If not, the person is deemed not to be in the labor force. Further questions are meant to determine if that person was not looking because he or she was discouraged about the chances of finding a job. If so, that person goes into a category that is included in a different indicator of unemployment.
    In the current recovery, that latter index has not declined nearly as much as the regular unemployment rate. That fact has been noted by Janet L. Yellen, the Federal Reserve chairwoman, as an indication the job market is not as healthy as the unemployment rate might make it appear.
    The government figures that may be least believed by the public are the inflation calculations. Since mid-2012, the index of prices for personal consumption expenditures — the index most closely watched by the Fed — has consistently risen by less than the Fed’s target of 2 percent. But consumers, as reflected in the Conference Board’s Consumer Confidence Survey, have always forecast annual inflation of at least 5 percent.
    Two Views of Inflation - Over the last 20 years, consumers [consumers what?!] have consistently forecast inflation to be higher than the figures reported by the government (graph caption) at the time.
    Why the discrepancy? It is possible that people are more likely to notice goods whose prices have risen than those whose prices have dropped. Mr. Singer, in his denunciation of official figures, questions adjustments that are made for the quality of goods and argues that government indexes understate the costs for the wealthy because prices of things like luxury real estate and art have increased far more than the prices of goods purchased by the middle class. And some people subscribe to a conspiracy theory that the Consumer Price Index figures are deliberately held down so the government can avoid paying richer Social Security benefits.
    So what are people to make of the blizzard of economic statistics? First, be suspicious of rapid changes in any indicator, particularly if other indicators do not show similar changes. Look for trends that continue. And pay attention to the real world around you. The chaos in the financial world in late 2008 should have warned Obama administration economists that the official statistics might be overstated.
    And try to separate reality from ideology. In 1983, when the economy accelerated after the early 1980s recessions, some liberals were sure the numbers had to be wrong, given that it was obvious nothing good could come from the policies of President Ronald Reagan.
    In 2010, there were widespread forecasts by conservatives that the economy could not improve, that inflation was bound to accelerate and the dollar would collapse if the Fed foolishly pursued its policy of quantitative easing.
    All those forecasts turned out to be wrong. Does that mean the forecasters were mistaken? Some would rather think it shows the statistics are being faked.

  2. also 11/07/2014 No slacking off in the workforce - Employment Report Should Show Stronger Jobs Market, by Spencer Jakab, Wall Street Journal, C1.
    WASHINGTON, D.C., USA - In addition to “not stretched or held in a tight position” and “lacking the expected or desired activity,” slack can mean “doing something poorly because you aren’t putting enough effort into it.”
    The Federal Reserve doesn’t actually use the word ['slack'] in its official view of the labor market, but Fed watchers do as shorthand for more workers than jobs. Those at Goldman Sachs, for example, said they disagree with the Fed policy-setting committee’s “view on [lessening] labor-market slack” in its statement last week.
    The Fed’s comments on jobs accompanied its decision not only to end quantitative easing, as expected, but to drop the word “significant” before “underutilization” in describing the labor market. For those who parse such statements closely, it signals more willingness to raise interest rates sooner and faster.
    If Friday’s jobs report comes in as expected—economists polled by The Wall Street Journal think nonfarm payrolls grew by 233,000—then it will get harder to quibble with that view. The labor market looks strong.
    Consider that jobs growth in the past year has been 2.64 million. That is the highest since April 2006, at the apex of the housing boom.
    Another statistic is even more astounding: The four-week moving average of claims for unemployment insurance is barely over 280,000. Not only is that the lowest since the spring of 2000, during an investment bubble, but it just fell below the record low relative to population set in 1969.
    Back then, inflation expectations already were rising and would spike sharply in the next several months. The benchmark 10-year Treasury note’s yield rose from 6.2% in the spring of 1969 to 8% by the end of the year.
    The counterargument from Goldman and others is that plenty of people today fall outside the common definition of unemployment, now at 5.9% of the labor force. Labor-force participation is the lowest since 1978 and not all of that can be chalked up to demographics [as if downsizing and outsourcing had little to do with it!]. Furthermore, many workers are involuntarily underemployed.
    [No kidding.]
    Neither those people nor the Fed can be called “slack” as in not trying hard enough. Yet many lacking the right skills, credentials or flexibility are idle even as bidding wars erupt for truck drivers, welders, programmers and the like [and with the floods of resumes resulting from a frozen 1940 workweek, employers are far too spoiled to bother doing the kind of training and credentialing they used to]. The economy has changed and no amount of easy money will fix that.
    [But a large amount of converting chronic overtime into training&jobs, and as much workweek reduction as it takes to create enough convertible overtime for full employment? That and that alone will fix it. And enable us all to move on from this boring boooring broken record of boring boring BORING same'ol problems to some new ones, like how to live much much longer and find out much much more about how we came to be.]
    Write to Spencer Jakab at spencer.jakab@wsj.com

  3. 8/21/2014 How Much Surplus Labor Do We Have? by Peter Coy & Matthew Philips, BusinessWeek.com
    Janet Yellen wants the hawks in the Federal Reserve System to cut her some slack on the topic of slack. As economists use the term, slack in the job market is a measure of labor supply. Too much slack means high unemployment. Too little means worker shortages, spiking wages, and inflation. Whether there’s too much slack, too little, or just the right amount has been a topic of intense debate since well before Yellen’s scheduled Aug. 22 speech on labor markets at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyo.
    Yellen, in her first year as chair of the Fed’s board of governors, is a slacker—she says the labor market remains soft and the central bank should keep concentrating on growth, not restraining inflation. She’s up against a group of hawks such as Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who say the slack is all but used up. Both sides cite official statistics to make their cases. “There’s lots of asymmetry out there in the data right now,” says Neil Dutta, head of U.S. economics at Renaissance Macro Research.
    Doves on the rate-setting Federal Open Market Committee (FOMC) play down the falling unemployment rate (6.2 percent in July) because, as they point out, it counts only people who are actively seeking work. The 2007-09 recession was so deep that many people stopped looking. Employment as a share of the adult population remains depressed. The dovish theory is that if demand heats up, many of those people will be drawn back into the workforce.
    Easy-money advocates point to the high number of people—7.5 million—who want full-time jobs but are working part-time for economic reasons like “unfavorable business conditions.” Before the recession began, there were only 4.6 million people in that situation. In a recent speech, Minneapolis Fed President Narayana Kocherlakota cited involuntary part-timers as evidence that plenty of workers are on the sidelines, ready to fill increased demand for labor.
    The Fed chair has managed to keep most of the FOMC on her side. After its latest meeting on July 30, the committee said in a statement that “a range of labor market indicators suggests that there remains significant underutilization of labor resources.” All of the Fed governors in Washington lean dovish, as do presidents of the regional banks in New York, Chicago, Boston, and San Francisco, not to mention Kocherlakota.
    But Yellen can’t take support for granted. Philadelphia’s Plosser dissented from the July 30 statement on the grounds that the language about how long interest rates will be kept low “does not reflect the considerable economic progress that has been made toward the Committee’s goals.” Minutes released on Aug. 20 revealed some sympathy for that view among other FOMC members. Besides Plosser, the hawks include the Fed presidents in Richmond, St. Louis, and Dallas. (Not all regional presidents vote in any given year, though all participate in FOMC deliberations.) Hawks focus on the sharp increase in the number of unfilled jobs, asking how much slack there could truly be in the labor market if there were 4.7 million openings for workers at the end of June. That’s up from a low of 2.1 million in July 2009. They are concerned that many people who dropped out of the labor market are never coming back—because they retired early or went on disability, or their skills atrophied. Declining unemployment could soon switch from a good thing to a bad thing, they suggest. In a recent speech, Dallas Fed President Richard Fisher said, “The economy is reaching our desired destination faster than we imagined.”
    To Yellen’s credit, an inflationary spike in wages is nowhere in sight. Given current inflation and productivity growth, workers should see wage gains above 3 percent, says Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch (BAC). Wage growth has been closer to 2 percent, no higher than overall inflation. It’s possible, as the hawks worry, that wage pressure is building up unnoticed. But Yellen has said that a little bit of above-target wage growth is OK as long as the public continues to believe that inflation will remain low over the long term. For now, the slackers at the Fed are running the show.
    [See also Job Stats Fail to Uncover Underemployed College Grads, by Victoria Stilwell, Businessweek.com in full on 10/30/2014 #2.]

  4. 12/31/2009 5.6 million reasons to doubt jobless rate, by Mark Gongloff, Wall St Journal, C1.
    The way jobless claims have been receding should signal that U.S. unemployment has finally peaked. That probably isn't the case this time.
    The Labor Department releases data on new claims for unemployment benefits on Thursday. Economists estimate claims rose to 455,000 in the Christmas week from 452,000 the prior week.
    Holidays make it tricky to seasonally adjust claims, which are volatile in the best of circumstances. Many economists instead focus on the four-week moving average, which irons out weekly fluctuations.
    Fortunately, that average has fallen steadily, from a high in April of 658,750 to 465,250, a 29% drop.
    Since the Labor Department started tracking weekly jobless claims in 1967, such declines have signaled an unemployment peak. In fact, by the time this average has fallen by 29%, unemployment already has topped out, typically about six months earlier.
    History suggests October's 10.2% unemployment rate was the worst of it, which would do wonders for the sustainability of the economic recovery. It also would mean the Federal Reserve raises rates sooner than investors expect.
    So why do most economists still think unemployment has further to rise? Part of the blame goes to the unusually stubborn nature of joblessness in this recession.
    The number of workers drawing regular benefits has fallen 1.9 million, from a record 6.9 million in June to just over 5.0 million. But instead of finding jobs, most of those people have exhausted regular benefits and joined the rolls of people drawing extended and emergency benefits.
    That number has swelled from 2.8 million in late June, when regular continuing claims peaked, to 4.7 million in early December. That extra 1.9 million matches the number of people no longer drawing regular benefits.
    Those people already are counted in unemployment. Another 5.6 million aren't counted in unemployment: That is the number of people who have given up looking for work and no longer drawing benefits and thus aren't counted in the labor force or in unemployment, which is the jobless percentage of the labor force.
    When they start looking again, as they typically do in recoveries, they will rejoin the labor force, competing with the roughly 9.9 million people drawing benefits. That alone will raise the unemployment rate again.
    Write to Mark Gongloff at mark.gongloff@wsj.com

  5. 4/20/99 Jobless figures deceptive - [Low] numbers no longer mean what they used to mean [=inflation due to full employment or general labor shortages], by Lester C. Thurow, Boston Globe, p. C4.
    ...In the past four years [1995-98] 2 million people have [been deducted from] the unemployment rolls [and so only those 2 million people should] have been added to the employment rolls \during that period.
    In fact, however, an extra 8 million people were added,
    for a total of\ 10 million people [who] have been added to the employment rolls [during that period].
    [This bizarre inflation in the number of employed people naturally overcounted the proportion of employed vs. unemployed relative to all previous figures, and grossly undercounted the proportion of unemployed, thus rendering today's "unemployment rate" totally incommensurate with all unemployment figures prior to 1994.  Let's look at that in different words - ]
    In 1994 there were essentially 8 million people who weren't counted as officially unemployed but who were, in fact, willing to work when jobs became available [because] eight million people who were not measured as unemployed [actually] went to work [1995-98].
    [Gotcha. Now, where did that mysterious 8 million people come from, Lester?]
    They came from a number of sources...[all colored by the fact that] in the rest of the world, reporting oneself as unemployed leads to unemployment benefits, but in the United States only one-third of those who are officially unemployed [are covered by] unemployment insurance..\..
    • Under the welfare reform laws [of 1995 mainly], millions on welfare [how many millions, Lester?] were ordered to go to work within a certain period of time or lose their benefits, but they were never [properly (or even improperly)] added into the unemployed numbers [at the time when they were, by fiat, defined as out-of-work jobseekers].  If the Dept. of Labor had been collecting figures that were consistent [with their own definition of "unemployed" and] with the laws being passed by Congress, there would have been a big upward blip in unemployment the month the welfare reform measure passed.
    • Under American law, legal immigrants [how many?] who are unemployed can be deported. In this situation, no sensible [green card] holder...would tell a government enumerator that they were unemployed. [This is] even more true for [illegal immigrants].
    • What is true for immigrants is equally true for [how many?] native Americans. [Why single out native Americans, Lester? Are you talking strictly "off the rez", or both off and on? "Just one of several groups like this." - Lester.]
    • ...It is far better [for all jobseekers - how many?] to tell potential employers that one is self-employed...than...unemployed....
    • ...Whatever the government enumerator [says] about confidentiality...common sense says tell...the government what you are telling private employers - You are not unemployed..\.. Reporting oneself as unemployed to a census taker [is more likely to hurt you than help you - the incentives are against it]..\..  Nothing good happens by telling anyone official that you are unemployed....
    [Well we still don't know exactly where Lester gets that 8 million figure or how it breaks down, but what Lester seems to be saying over and over again in different ways is that, in America, unemployment has become culturally stigmatized - maybe not quite so much as in Japan, but part of the way, anyhow. So what is the bizarre result of all this?]
    Even with a ["low"] 4% measured unemployment rate, [we have a contradiction, a paradox, a crux interpretatum -] labor is plentiful [and wages have been flat for decades].... Some employers [complain about] shortages of specific skills, but even these are relatively infrequent \and\ employers are not complaining about general labor shortages. If jobs are available, people are available to fill them.
    [Oo oo oo, Lester comes this >< close to realizing the horrible truth = we have a HUMUNGUS GLOBAL BALLOONING labor SURPLUS and the only reason wages are not in downward freefall is the well-known "downward inflexiblity of wages" and the fact that so many unskilled wages have already bottomed out at culture-specific dirt-subsistence levels. Hence stagnant worldwide markets - the only people who still have any money - and they have so SOOOOOOOOO much - is the top 1-5% - the famed "growing income gap" or in more actionable terms, the extreme concentration of wealth - to the point of the suctioning of markets away from otherwise viable mega-investment targets (such as Asia, Latin America, rural America, inner-city America, and extending a block a year in every direction...).
    [Lester has a nice footnote on those "some employers [who] report shortages of specific skills" - ]
    Usually the employers complaining about skills shortages are also employers who themselves do no training. They simply want someone else to pay for training their work force. No one should take seriously employers who do no training themselves but complain about a shortage of skilled workers.
    [Listen up, legislators who are being lobbied to death by whining high-tech CEOs complaining they need more visas issued for low-wage pre-trained programmers from India! In fact, high tech's huge labor surplus is captured by its 17% official unemployment rate - in the over-50 age category.
    [Lester also adduces evidence from overall output vs. output per hour of work ("productivity") - ]
    I haven't heard of anyone who wants to buy something but is told that that particular good or service is simply not available...because there is a shortage of labor.... Output is growing at a 4% rate. That could only happen in the midst of [general] labor shortages if productivity growth were bounding upward. It isn't. While productivity growth is a little better than it has been, it is still low by historical standards.
    [We would argue that one of the huge costs of the lack of a smooth automatic mechanism to spread the benefits of waves of productivity-raising technology (to the general public in terms of more free time) is an imperceptibly gradual decline of innovation and of productivity-raising technology and indeed, of plain old productivity itself. And sure enough, Lester duly notes our passive Luddism - ]
    It is growth in hours of work that is driving [output].
    [Lester actually says "that is driving the American economy forward" but we would argue that this is not "forward" but backward, especially when the growth in hours is not being counted. And output is not the only economic indicator that the undercounting of actual working hours is distorting. For example, it is also distorting average hourly earnings, according to "US economy: The statistical reports economists love to hate," Bloomberg Feb/23/2001 10:46 ET via AOLNews, which states, "Average hourly earnings, part of the Labor Dept's closely watched monthly jobs report, is flawed because while companies usually pay salaries based on a 40-hour work week, some employees work considerably more." We are working longer hours (if we still have full-time jobs) than we have for over 50 years - that is not a "forward" step for the American economy. We have the largest proportion of prison inmates in our entire history - that is not "forward". The American Dream has become hitting the lottery or suing the deep pocket - that is not "forward." ... Lester summarizes - ]
    Unemployment, even if it were accurately measured [whoa, what an admission!], doesn't mean what it used to mean [which was - "general labor shortages" resulting in rising labor leverage and upward pressures on wages and benefits, without which we'll never bridge the famous "widening income gap"]. It has ceased to be an indicator of upward wage pressures.
    [Again, Lester comes this >< close to 'getting it' and glimpsing the glaringly obvious gross and growing global labor glut - but to paraphrase Keynes, none are so blind as those that will not see. Lester goes off on a little digression about the source of inflationary pressures in the past, which he locates the past behavior of durable goods manufacturing wages. He implies that things have changed because there's now a huge ("tens of millions") pool of service employees getting paid one-third less than their manufacturing counterparts who would love to move into manufacturing jobs. To attract them, manufacturing doesn't have to raise wages as in the past, so - no more wage-push 'inflation'. Lester neglects to mention that the whole reason there's such a huge pool of employees in the service sector in the first place is because there's hardly any manufacturing sector left compared to what there used to be, so millions of downsized manufacturing employees have, in desperation, grabbed up lower-paying jobs in services.
    [Lester ends with a Q&A - ]
    When will we know that we really are at full employment? When gains in employment [are] equally matched by reductions in unemployment.
    [And how about until real wages really go up - or is that impossible now because the Fed will label it "inflation" and raise interest rates to choke it off?]

  6. 9/29/2002 Help wanted - Out of a job and no longer looking - Our welfare state in closer to Europe's than we think,
    by David Leonhardt, NYT, 4-1.
    [Here's just the headline of another relevant article. We excerpt and comment-on this article on 9/29/2002 #1.]

Let's follow up with the following points about the U.S. Labor Dept's monthly unemployment statistics, which short-term-oriented US stock analysts, economists and media constantly trumpet as one of their three main indicators of economic 'robustness' (the others being rising GDP and low inflation (CPI). Let's go through these in reverse order. First, let's look at the Labor Dept's versions of the unemployment definition, as presented in a Reuters newswire release lightly edited for typos and polyverbalism.

3/08/96 U.S. Labor Dept releases alternative jobless rates, Reuters newswire.
WASHINGTON - The Labor Department on Friday (i.e., 3/08 [or 3/01?]) released in its February/96 report a new series of alternative measures for unemployment. The series, called "U-1 through U-6," is adapted from alternative rates first introduced in 1976. Publication of the series was halted for two years to permit study of the measures after the Department's 1994 revamp of the unemployment survey. [Was that the same revamp as the one where they started counting each part-time job as one full-time job instead of calculating the its full-time fractional equivalent?]
Starting with the Feb/96 report, the Department is resuming the release of the statistics in revised form ["resuming" after how long a gap and why (each way)?]. Following are the Feb/96 rates and a description of what they measure:

  • U-1 - People unemployed 15 weeks or longer, as a percent of the civilian labor force. Seasonally adjusted rate is 1.7%. Unadjusted rate is 1.9%.
  • U-2 - Job losers (including people who completed temporary jobs), as a percent of the civilian labor force - the official unemployment rate [i.e., for the government?]. Seasonally adjusted rate is 2.7%. Unadjusted rate is 3.1%.
  • U-3 - Total number of unemployed, as a percent of the civilian labor force - the "official" unemployment rate [i.e., for the public?]. Seasonally adjusted rate is 5.5%. Unadjusted rate is 6.0%.
  • U-4 - Total number of unemployed, plus discouraged job seekers, as a percent of the civilian labor force. Seasonally adjusted rate is not available. Unadjusted rate is 6.3%.
  • U-5 - Total number of unemployed, plus discouraged job seekers, plus all other marginally attached workers [for example?], as a percent of the civilian labor force plus marginally attached workers. Seasonally adjusted rate is not available. Unadjusted rate is 7.2%.
  • U-6 - Total number of unemployed, [plus discouraged job seekers?] plus marginally attached workers, plus all people employed part-time for economic reasons (i.e., forced part-timers), as a percent of the civilian labor force plus marginally attached workers. Seasonally adjusted rate is not available. Unadjusted rate is 10.7%.

    Notice that we have here only four real rates of unemployment (U-3 to U-6). The other two in the list are specialized rates, one measuring persistent unemployment (U-1 excludes those who have been unemployed for less than 15 weeks) and one measuring just-started unemployment (U-2 excludes those who have been unemployed for more than a week).

    Of the four rates of unemployment, we only hear in the media about the figure that is most reduced by exceptions (U-3). However, when most people hear the term "unemployment rate", they assume it really reflects the whole problem similar to the inclusiveness of U-6, which is much higher. In these figures for Feb/96, for example, when U-6 is nearly 11% (10.7), all we hear about is U-3's level of 6.0%, further reduced by adjustment for seasonality down to 5.5%, nearly half of the real rate.

    Thus incumbent politicians are flattered for their economic policies, and ordinary employees, though they see the devastation of downsizing all around them, are given the impression that if they can't find a job quickly in this 'robust economy' with such a low 'unemployment rate', it must be their fault. At any rate, don't whatever you do, ask for a raise because you might be the next to get downsized.

    For the vast majority of employees who are not occupying the executive suites and board rooms of America, this means 'heads executives win, tails employees lose.' Top executives, if only on a short term basis, have figured out how to have their cake and eat it too - how to get the best of both worlds, the world of high unemployment with employees too scared to ask for raises and so inflation is low, and the world of low unemployment where nobody is seriously going to do anything about this, because, hey, what's the problem, 'unemployment is LOW, dummy!' The only problem, of course, is that this 'solution' is inherently short term, because employers need markets, and markets consist overwhelmingly of employees. Bash employees and your bashing markets. Win-lose strategizing between you and your employees means - you lose markets. It's gotta be win/win - and we don't mean rhetoric - or the whole juggernaut turns into a huge bubble and pops.]

    Secondly, we have the following article snippets.

    1/20/96 Employment Data Skewed; Resolution of Strikes Muddles Numbers, by Michael Arndt, Knight-Ridder/Chicago Tribune Business News.
    CHICAGO - The strikes against Caterpillar Inc. and Boeing Co. disrupted families and commerce from Peoria to Puget Sound. Now, with the strikes over, they seem to be messing up the government's latest unemployment figures.
    In a jarring report, the Labor Department said Friday [1/19/96] the unemployment rate in Illinois jumped to 5.7 percent in December from 5 percent a month earlier, putting it above the national rate, which held steady at 5.6 percent last month.
    But economists said the state and national percentages were skewed by the end of the strikes, though with opposite results. December's jobless rate in Illinois apparently was exaggerated by the thousands of Caterpillar workers no longer on strike in mid-December, but who had not yet all been called back to work after the United Auto Workers capitulated to the Peoria-based manufacturer. In limbo, these workers could categorize themselves as unemployed when the Labor Dept. conducted its December survey. Though no one can know how these workers answered the survey, Diane Swonk, deputy chief economist for First Chicago NBD Corp., estimated they inflated the state's jobless ranks by as much as 7,000 last month and even more when statisticians adjust the figures....
    The average [unemployment] rate in Illinois over the previous three months - a more accurate measure of employment - was 5.2%. For 1995, Illinois' unemployment rate also was 5.2% percent - the lowest annual rate in 21 years. Furthermore, on average 5.78 million people were working in Illinois last year, the highest number ever. The nation's jobless rate averaged 5.6 percent last year; it has been lodged at that rate for four of the last five months.
    Still, most private economists said the U.S. labor market appears increasingly tired after nearly five years of expansion. "The economy is weak," said Evelina Tainer, chief economist with Indosuez Carr Futures Inc. in Chicago. "We're not near a recession, but this is certainly not an improving economy; this is not an economy you would write home about."
    For the second month in a row, the U.S. labor force contracted in December and grew only 0.4% all year, noted Bruce Steinberg of Merrill Lynch & Co. in New York. That is half the growth rate of the adult population, which, Steinberg said, suggests that many potential workers are not counting themselves as part of the labor force.

    This article evidences the weak telephone-survey technique of gaining unemployment statistics.

    Thirdly, in a number of ways, "work" is moving out from under the Labor Dept's scopes. The attempt by many employers to escape the costs of benefits by converting their workforce to part time is one such way. Another is the growing number of people who "let their fingers do the walkin'" through the want ads in the newspaper in their job search, as the job market gets tougher job qualifications. This and a number of other ways come up in the following article about Canadians who think they've discovered a a few reasons why their unemployment rate is higher than the U.S.'s.

    2/05/96 The Issue: Unemployment rates. What's new: Different standards in U.S. and Canada... - Passive job search explains gap in unemployment rates , Calgary Herald via Southam Electronic Publishing.
    OTTAWA - Seven per cent of Canada's unemployed have done nothing more than browse the help-wanted ads in their search for work. In the U.S., merely ``looking at job ads'' isn't enough to be listed among the unemployed, defined as those who are out a job but actively searching for work.
    The finding by Statistics Canada helps explain what has been a widening gap between the jobless rates here and in the U.S., a mystery that has taxed the brains of Canadian economists for a decade. ``It's not clear who first identified the fact that there was a difference in the type of job search accepted in defining unemployment in the two countries,'' Statistics Canada says in a research paper to be presented to a two-day conference on ``the Canada-U.S. unemployment rate gap,'' which starts Friday. Regardless, it reveals in part why Canada's jobless rate is higher than the U.S. rate. If those roughly 100,000 so-called ``passive'' Canadian job hunters weren't included, as they wouldn't be in the U.S., Canada's jobless rate at year end would have been only 8.8 per cent, not 9.4 per cent. That would still have been a lot higher than the 5.6-per-cent rate in the U.S. at year end. Viewed in another way, if passive job hunters were included in the U.S. count of its unemployed, the rate in that country would be higher.
    ``This does not necessarily represent the full effect of the exclusion of passive job search in the (U.S.),'' the Statistics Canada paper states. ``It's a new finding,'' said Andrew Sharpe, the economist heading the Canadian Centre for the Study of Living Standards, an Ottawa-based economic think-tank, which is sponsoring next week's conference....
    But Sharpe, in a paper he also plans to present at the conference, has another simple explanation for part of the divergence. The U.S. economy has been outperforming the Canadian economy, he noted....
    Among the other explanations that have been offered is that unemployment insurance and other social programs in Canada have been more generous than those in the U.S., reducing the incentive among the unemployed to search for work. That explanation has been used to justify cuts in Canada's social safety net. If correct, then the cuts in social programs, particularly UI, that have and are about to take place, should narrow the gap. There's been no evidence of that happening yet, however.
    Even Finance Minister Paul Martin has offered an explanation for the gap, saying that in the U.S. there's a large underclass, that doesn't exist [in Canada], and that's not included in its unemployment figures. If he's right, that would suggest the unemployment problem in the U.S. is worse than its jobless figures suggest, not that Canada's is any less severe. In fact, Martin has speculated that Canada's jobless rate is really worse that the official Statistics Canada numbers indicate.

    So there are a number of ridiculous and obsolete exceptions in the U.S. definition of 'unemployment' that make U-3 mere window-dressing.

    And speaking of that 'large underclass' in the U.S., the fourth fraud of 'low' unemployment is that it's missing the real problem by starting at the wrong end - the solution - instead of the problem. You can't correct the solution. You can correct the problem. And the problem is lack of remunerated time. So Timesizing bases its solution on the problem via a regular unemployment-defining referendum whose working also catches the underclass -

    Any non privately supported person who has averaged less that (x)___ working hours per week for longer than the last (y)___ weeks is "unemployed". Any unemployment rate above (z)___ percent is problematic and should trigger a downward adjustment in the employment-sharing and reinvestment threshold defining the top of the maximum workweek. Any adjustment should take place at a pace of (a)___ hour(s) or fraction of an hour per month.

    For more details, see our campaign piece Timesizing, Not Downsizing, which is available online from *Amazon.com and at the Harvard Square Coop, Cambridge, Mass. )3d floor mgmt or economics).

    Questions, comments, feedback? Phone 617-623-8080 (Boston) or email us.


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