New Column up at Real Money (02/9/05)



My latest column, "Rosy Jobs Rate Has Thorny Underside is up at RM. It is loosely based upon Unemployment Rate: Worse than it Appears from earlier this week.

Here’s an excerpt:

"But Mr. Greenspan’s augmented unemployment rate is hardly the broadest measure
of unemployed personnel in the country. For that, we need to go to U-6, found at
the Bureau of Labor
Statistics’ Table A-12
, which is the BLS’ "alternative measures of labor
underutilization." It is the fullest measure of unemployed persons, and it
includes those people who have been looking for a job, but unable to secure one
— plus all "marginally attached workers," plus the total "employed part time
for economic reasons."

The BLS defines "marginally attached workers" as "persons who currently are
neither working nor looking for work but indicate that they want and are
available for a job and have looked for work sometime in the recent past." This
group includes the so-called "discouraged workers," a subset of the marginally
attached. They are defined as having given a "job-market related reason for not
currently looking for a job" (i.e., can’t find a job, despite looking for one,
and then giving up). Last, the BLS defines "persons employed part time for
economic reasons" as "those who want and are available for full-time work but
have had to settle for a part-time schedule."

What is the U-6 measure of unemployment? As of Friday, using January 2005
data, it is 10.2%.

That’s a pretty grim statistic . . ."


Rosy Jobs Rate Has Thorny Underside
2/9/2005 9:30 AM EST

What's been said:

Discussions found on the web:
  1. Dave S. commented on Feb 11

    “That’s a pretty grim statistic . . .”

    But it’s always been a grim statistic. What was it in Jan. of 1997, the start of Clinton’s second term 10.4 (not seasonally adjusted like the 10.2).

    What was the average difference between the reported unemployment rate and the U-6 during Clinton’s last 6 years 1995-2000: 3.73

    What was during Bush’s first term? 3.86

    Is that significant?

  2. Barry Ritholtz commented on Feb 12

    Excellent point! But let’s see how that impacts the markets and investors.

    Generally speaking, most economists are describing the economy as healthy, good, improving. The public hears this, and hears the low unemployment rate. That gives them confidence, and they invest in the market.

    If it turns out the most widely reported data is misleading in some way, that sets up what I like to call a variant perception: Something YOU and I may know, but the bulk of the investing public does not. For example, there might have been a narrow difference between the unemployment rate and the U6 rate over the past few years — a 6.5% UR and a 9.5% U-6 is 3 points, and about 50% variance.

    Today, its 5.2% vs 10.4% — thats a 100% difference. If we can undestandd this and its economic repurcussions, while most do not — that’s a competitive edge within the market.

    Understanding this, while the crowd does not, is money. Eventually, this info will work its way
    into the public consciousness. But I believe markets are not nearly as efficeint as mosttheorists do.

    For more on this, see The kinda-eventually-sorta-mostly-almost Efficient Market Theory

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