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.  Lastly, scope a recent article by Mark Gongloff of the Wall Street Journal and one 10 years earlier by Lester Thurow of MIT's Sloan School of Management - 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 * 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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