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-----Original Message----- From: Sid Shniad [mailto:[email protected]] Sent: Sunday, June 21, 2009 11:53 AM Subject: Real U.S. unemployment rate at 16.4% http://dollarsandsense.org/archives/2009/0709miller.html=20 Dollars&Sense: Real World Economics June 10, 2009=20 Economy in Numbers=20 The Real Unemployment Rate Hits a 68-Year High=20 Comparing the Bureau of Labor Statistics=E2=80=99 =E2=80=9CU-3=E2=80=9D and= =E2=80=9CU-6=E2=80=9D rates.=20 By John Miller=20 Although you have to dig into the statistics to know it, unemployment in th= e United States is now worse than at any time since the end of the Great De= pression.=20 >From December 2007, when the recession began, to May of this year, 6.0 >mill= ion U.S. workers lost their jobs. The big three U.S. automakers are closing= plants and letting white-collar workers go too. Chrysler, the worst off of= the three, will lay off one-quarter of its workforce even if it survives. = Heavy equipment manufacturer Caterpillar and giant banking conglomerate Cit= igroup have both laid off thousands of workers. Alcoa, the aluminum maker, = has let workers go. Computer maker Dell and express shipper DHL have both c= anned many of their workers. Circuit City, the leading electronics retailer= , went out of business, costing its 40,000 workers their jobs. Lawyers in l= arge national firms are getting the ax. Even on Sesame Street, workers are = losing their jobs.=20 Table 1: The May 2009 Unemployment Picture Source: Table A-1, Bureau of Labor Statistics, U.S. Labor Department, www.b= ls.gov .=20 The official unemployment rate hit 9.4% in May=E2=80=94already as high as t= he peak unemployment rates in all but the 1982 recession, the worst since W= orld War II. And topping the 1982 recession=E2=80=99s peak rate of 10.8% is= now distinctly possible. The current downturn has pushed up unemployment r= ates by more than any previous postwar recession (see Table 1).=20 Calculating the Real Unemployment Rate=20 The BLS calculates the official unemployment rate, U-3, as the number of un= employed as a percentage of the civilian labor force. The civilian labor fo= rce consists of employed workers plus the officially unemployed, those with= out jobs who are available to work and have looked for a job in the last 4 = weeks. Applying the data found in Table 2 yields an official unemployment r= ate of 9.1%, or a seasonally adjusted rate 9.4% for April 2009.=20 The comprehensive U-6 unemployment rate adjusts the official rate by adding= marginally attached workers and workers forced to work part time for econo= mic reasons to the officially unemployed. To find the U-6 rate the BLS take= s that higher unemployment count and divides it by the official civilian la= bor force plus the number of marginally attached workers. (No adjustment is= necessary for forced part-time workers since they are already counted in t= he official labor force as employed workers.)=20 Accounting for the large number of marginally attached workers and those wo= rking part-time for economic reasons raises the count of unemployed to 24.0= million workers for May 2009. Those numbers push up the U-6 unemployment r= ate to 15.9% or a seasonally adjusted rate of 16.4%.=20 Some groups of workers are already facing official unemployment rates in th= e double digits. As of May, unemployment rates for black, Hispanic, and tee= nage workers were already 14.9%, 12.7% and 22.7%, respectively. Workers wit= hout a high-school diploma confronted a 15.5% unemployment rate, while the = unemployment rate for workers with just a high-school degree was 10.0%. Nea= rly one in five (19.2%) construction workers were unemployed. In Michigan, = the hardest hit state, unemployment was at 12.9% in April. Unemployment rat= es in seven other states were at double-digit levels as well.=20 As bad as they are, these figures dramatically understate the true extent o= f unemployment. First, they exclude anyone without a job who is ready to wo= rk but has not actively looked for a job in the previous four weeks. The Bu= reau of Labor Statistics classifies such workers as =E2=80=9Cmarginally att= ached to the labor force=E2=80=9D so long as they have looked for work with= in the last year. Marginally attached workers include so-called discouraged= workers who have given up looking for job-related reasons, plus others who= have given up for reasons such as school and family responsibilities, ill = health, or transportation problems.=20 Second, the official unemployment rate leaves out part-time workers looking= for full-time work: part-time workers are =E2=80=9Cemployed=E2=80=9D even = if they work as little as one hour a week. The vast majority of people work= ing part time involuntarily have had their hours cut due to slack or unfavo= rable business conditions. The rest are working part time because they coul= d only find part-time work.=20 To its credit, the BLS has developed alternative unemployment measures that= go a long way toward correcting the shortcomings of the official rate. The= broadest alternative measure, called =E2=80=9CU-6,=E2=80=9D counts as unem= ployed =E2=80=9Cmarginally attached workers=E2=80=9D as well as those emplo= yed =E2=80=9Cpart time for economic reasons.=E2=80=9D=20 When those adjustments are taken into account for May 2009, the unemploymen= t rate soars to 16.4%. That is the highest rate since the BLS began calcula= ting the U-6 rate in 1994. While not exactly comparable, it is also higher = than the BLS=E2=80=99s earlier and yet broader adjusted unemployment rate c= alled the U-7. The BLS began calculating the U-7 rate in 1976 but discontin= ued it in 1994 in favor of the U-6 rate. In the 1982 recession the U-7 reac= hed 15.3%, its highest level. In fact, no bout of unemployment since the la= st year of the Great Depression in 1941 would have produced an adjusted une= mployment rate as high as today=E2=80=99s.=20 Table 2: The May 2009 Unemployment Picture Why is the real unemployment rate so much higher than the official, or U-3,= rate? First, forced part-time work has reached its highest level ever, goi= ng all the way back to 1956 and including the 1982 recession. In May 2009, = 8.8 million workers were forced to work part time for economic reasons. For= ced part-timers are concentrated in retail, food services, and construction= ; about a quarter of them are young workers between 16 and 24. The number o= f discouraged workers is high today as well. In May, the BLS counted 2.2 mi= llion =E2=80=9Cmarginally attached=E2=80=9D workers. That matches the highe= st number since 1994, when the agency introduced this measure.=20 With the economy in the throes of a catastrophic downturn, unemployment, no= matter how it=E2=80=99s measured, will rise dramatically and impose yet mo= re devastating costs on society and on those without a job or unable to fin= d full-time work.=20 John Miller teaches economics at Wheaton College and is a member of the Dol= lars & Sense collective.=20 Sources: U.S. Dept. of Labor, =E2=80=9CThe Unemployment Rate and Beyond: Al= ternative Measures of Labor Underutilization,=E2=80=9D Issues in Labor Stat= istics , June 2008; John E. Bregger and Steven E. Haugen, =E2=80=9CBLS intr= oduces new range of alternative unemployment measures,=E2=80=9D Monthly Lab= or Review , October 1995.=20 _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
