A look behind the unemployment numbers

[J]

WSJ link

The Economy Is Even Worse Than You Think
The average length of unemployment is higher than it's been since government began tracking the data in 1948.


By MORTIMER ZUCKERMAN
The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.
Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:


David Klein
- June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

- The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

- The goods producing sector is losing the most jobs -- 223,000 in the last report alone.

- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.

Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.

Well what do you know, truth in a mainstream media source, though of course it's buried in the editorial opinions section. I like how he points out the completely fictional adjustments in the birth/death model which added nearly 200k phantom jobs to the labour force. And of course there's the ongoing revisions to the numbers, the final revised unemployment numbers for nearly the last year have always been quite a bit worse than the initial ones, yet the BLS refuses to correct its methodology. Now if only every newspaper would put something like this right on the front page.

[Uraniun235]

Now if only every newspaper would put something like this right on the front page.

What do you think the public would do about it?

[Surlethe]

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

These are the big ones to bear in mind, I think. Any official "unemployment rate" is deceptive because, like any single-number measure of a complex phenomenon, it can only shed light on part of the picture. Unemployment is not black-and-white, it's a gray measure that has to take into account labor force participation (babies are unemployed, but nobody expects them to be employed) - see the first bullet above - and whether the worker wants to work more - see the second and third points. Officially, you're unemployed if you are not working more than so many hours per week and have searched for a job at one point in the last four weeks, but while this is an okay measure it doesn't catch people who are marginally outside the labor force (i.e., would start looking for jobs if they thought they could find them), or who work less than the cutoff but don't have time to search for new jobs, or who were forced to take pay cuts or time cuts or can only find part-time employment.

[J]

What do you think the public would do about it?

Hopefully, they'd become greatly upset and force the government to institute an actual fix for the economy. Or at the least they'd have some understanding of the situation and begin taking steps to protect themselves, such as pulling their retirement savings out of the stock market instead of doubling down and losing it all.

---

Surly-pooh: This is where Table A-12 of the unemployment report comes into play. For whatever reason the government & media choose to ignore discouraged workers and those forced to work part-time by economic reasons, I don't quite agree with this standard but I can live with it. Personally I'd prefer using U-5 as the headline unemployment number and have U-6 released along with it on the first couple lines of every unemployment report instead of being buried in a table which few people ever read.

[Count Chocula]

Hopefully, they'd become greatly upset and force the government to institute an actual fix for the economy.

Buhh-what? The government has exacerbated the problems the US economy's experiencing; I hardly think the $3 trillion budget, $1.5 trillion deficit, see-Bush-bailout-and-double-down majority in DC would or could "fix" the economy, outside of enforcing existing banking and contract law. And bring the Fed and Treasury to heel. Oops, never mind; they're gleefully violating existing law themselves and letting the White House, Bernanke and Little Timmy run rampant! Who needs laws when you've got the whip hand, after all.

To your second point: I agree. The US stock market is now so clearly manipulated that only the inside players and mouth-breathing double digit IQ "investors" are active. Volume on the exchanges sucks hot dogs and over 40% is program trading. Commodities, short term T-bills, and cash are unfortunately the only way to preserve capital for the small investor right now. If you think you're getting back that 40% of your portfolio that went "poof" in 2008-2009, you're dreaming or desperate.

[FireNexus]

Buhh-what? The government has exacerbated the problems the US economy's experiencing; I hardly think the $3 trillion budget, $1.5 trillion deficit, see-Bush-bailout-and-double-down majority in DC would or could "fix" the economy, outside of enforcing existing banking and contract law. And bring the Fed and Treasury to heel. Oops, never mind; they're gleefully violating existing law themselves and letting the White House, Bernanke and Little Timmy run rampant! Who needs laws when you've got the whip hand, after all.

Always trust Count Chocula to completely miss the fucking point. The reason the current boondoggle has been ineffective is because it was designed to try and prop up the existing financial system, which is unsustainable. It has nothing to do with some intrinsic uselessness of government. Of course the current plan won't work.

A properly galvanized public, however, might get banker dick out of congressional mouth long enough to have an actual fix pushed through. This would include things like infrastructure spending to create jobs and universal health care to take some of the burden off business and make our workforce healthier. If the public hates you enough, no amount of lobbyist money is getting you reelected.

Think before you post, fuckwit.

[TheKwas]

What do you think the public would do about it?

Hopefully, they'd become greatly upset and force the government to institute an actual fix for the economy. Or at the least they'd have some understanding of the situation and begin taking steps to protect themselves, such as pulling their retirement savings out of the stock market instead of doubling down and losing it all.
.

Wouldn't that just have the effect of causing a further collapse in the stock market? ie, self-fulfilling prophecy.

I can see how you would want to increase spending during a recession, but to empty out everyone's stock portfolio?

[aerius]

The stock market is toast anyway, the only question is when it happens and how much money gets destroyed on the way down. The longer we continue to pump the market with bailouts and false hope to keep and lure more suckers into the market, the worse the crash will be when it finally comes, and the less control and warning we'll have of the collapse. Right now we can do a controlled crash of the markets down to maybe 400-500 on the S&P500 and then have a slow grind downwards or a flatline from there, but if we keep doing bailouts and pumping stocks by falsifying earnings reports and so on, it sets up for a panic crash or series of crashes down to the 100-200 level when the game finally comes unglued.

For instance, China has been having several bond auction failures in the last few weeks, which means they're having trouble financing their debt. If they can't get that fixed they'll have find other ways to raise funds, such as selling their US Treasury holdings. That would suck for the US.

[Count Chocula]

Always trust Count Chocula to completely miss the fucking point. The reason the current boondoggle has been ineffective is because it was designed to try and prop up the existing financial system, which is unsustainable. It has nothing to do with some intrinsic uselessness of government. Of course the current plan won't work.

A properly galvanized public, however, might get banker dick out of congressional mouth long enough to have an actual fix pushed through. This would include things like infrastructure spending to create jobs and universal health care to take some of the burden off business and make our workforce healthier. If the public hates you enough, no amount of lobbyist money is getting you reelected.

Think before you post, fuckwit.

It has everything to do with "some intrinsic uselesness of government," which if you had passed Reading Comprehension for Dumbasses is not what I wrote. THIS government has proven itself fundamentally incapable of fiscal prudence. The Congress of 2008-2009 (there was only 5% turnover in the last elections IIRC) ignored their constituents who were 300-1 against the Bush bailouts to pass them, then ignored them again for Obama's $787 billion ARRA stimulus. You know, the "infrastructure spending," "shovel ready" stimulus. How's that working out so far? The current "universal" health care plan is estimated to cost $1 trillion or more. If you really think that Federal infrastructure spending and universal health care would help fix our economy, I'd love to see some numbers.

We can yell all we want at Congress, hell a lot of us have been doing just that, but the Federal budget is on an unsustainable path according to the Congressional Budget Office. Our president is a man who has never held a private sector job, and VP Biden comes out with gems like "We Have to Go Spend Money to Keep From Going Bankrupt." And as I've already noted, Congress has done nothing to enforce existing laws that would have forced the bankruptcy of banks that fully deserved it. And most sitting Congressmen and Senators were returned to office. Good luck with that whole "properly galvanized public" thing, Bunky.

[Surlethe]

Why is "fixing" the economy the goal, instead of helping people? What makes you (and the rest of the goddamn nation, while we're at it) think that an economy is some sort of machine, that it "breaks" and can be "fixed"? That's an analogy, it's not the way the thing actually works, leaving aside the idea that an economy has some sort of intrinsic purpose.

[Simon_Jester]

If the deep dysfunctions of the economy aren't fixed/healed/removed/whatever, efforts to help people are likely to get bogged down. If you work hard enough and fast enough, and spend your efforts freely enough, you can put money in pockets that need it. But you won't be able to make sure it stays there until you get rid of the systemic problem.

Of course, fixing the American economy would probably start with razing Wall Street to the ground (give or take a little) and starting over practically from scratch. So we may just be screwed.

[Broomstick]

Meanwhile, while people debate deflation and inflation and what to do and what not to do people like me are in very real danger of simply running out of money and resources. Actually, it's already happening. Debating inflation vs. deflation is sort of pointless when you have no money at all.

[Ace Pace]

Meanwhile, while people debate deflation and inflation and what to do and what not to do people like me are in very real danger of simply running out of money and resources. Actually, it's already happening. Debating inflation vs. deflation is sort of pointless when you have no money at all.

Why can't you do both? How do you intend to solve the problem of "running out of money and resources" if you don't look at the large picture and attempt to "rebuild" the larger economy.

[Broomstick]

HOW do you propose I do that? Seriously? Do you not know what "running out of resources" means?

If you have no money for a place to live, no money for food, and you're living out of your car.... HOW do you go about "rebuilding" the economy? When you have an education, a strong body, a sharp mind, and yet there is no work to be had HOW do you propose "rebuilding" anything?

Right now my immediate problem is simple: either I make another $400 by the end of the month or I can not pay my rent. While I am working long hours for shit wages and, when not doing that, looking for work, ANY work, you also expect me to keep tabs on the "big picture" and find a way to "rebuild" the economy?

That is, of course, the conundrum of the poor - you spend so damn much time and energy just surviving there is nothing left for anything else.

[Ace Pace]

You misunderstand me. You seem to be complaining that we shouldn't be debating or examining inflation numbers or anything like that. I'm saying that without checking them and knowing the ramfications, there is no way to find a solution.

[Broomstick]

Oh, OK - yes, we (or somebody) needs to discuss those things, but when you're scrabbling for survival theory starts to fade in importance to immediate practicality.