In today’s NYTimes, Floyd Norris hits on a subject that has been a favorite of ours over the years: Finding the true measure of the economy’s labor situation.
"The unemployment rate is low. The jobless rate is high.
Those two seemingly contradictory statements are especially true for American men in what should be the prime of their working lives. Those facts may help to explain the stark pessimism of Americans about the economy, and shed some light on the rise of illegal immigration as a political issue."
How is that possible? The two different rates measure two very different things:
"The unemployment rate paints a less gloomy picture. Among men ages 25 to 54 — a range that starts after most people finish their education and ends well before most people retire — the unemployment rate is 4.1 percent. That is not especially low, but it is well below the peak rate in all but one post-World War II recession. Only people without jobs who are actively looking for work qualify as unemployed in the computation of that rate. It does not count people who are not looking for work, whether or not they would like to have a job.
But there is another rate — called the jobless rate in this article — that counts the proportion of people without jobs. To be sure, some of them do not want to work. Some are raising families on a spouse’s income, or are disabled, retired or independently wealthy. But others may be discouraged workers, who would take jobs if they thought any desirable positions were available.
So how bad is the "Jobless" rate? How about the 2nd highest sinbce WWII:
In the latest report, for March, the Labor Department reported the jobless rate — also called the “not employed rate” by some — at 13.1 percent for men in the prime age group. Only once during a post-World War II recession did the rate ever get that high. It hit 13.3 percent in June 1982, the 12th month of the brutal 1981-82 recession, and continued to rise from there.
A Tale of Two Rates
chart courtesy of NYT
Good stuff, Floyd.
The Misleading Jobless Rate (March 2008) http://bigpicture.typepad.com/comments/2008/03/the-misleading.html
A Closer Look at Unemployment (September 2007)
Unemployment Levels and Labor Participation Rate (February 2006) http://bigpicture.typepad.com/comments/2006/02/unemployment_an.html
Unemployment vs Underemployment (July 2004) http://bigpicture.typepad.com/comments/2004/07/unemployment_vs.html
Chart of the Week: Augmented Unemployment Rate (January 2004) http://bigpicture.typepad.com/comments/2004/01/chart_of_the_we_2.html
Many More Are Jobless Than Are Unemployed
NYT, April 12, 2008