Cutting Budget Deficit Lowers Growth, Raises Unemployment in the Near-Term

[Toro]

But raises output and lowers real interest rates over the long-term. Also, lowering the deficit through tax increases is typically worse than by cutting spending.

For those who don't want to read the paper or the exerts below, the conclusions are as follows;

• Cutting the budget deficit will lower growth and raise unemployment over the next 1-2 years. The effects of cutting the budget deficit is to raise the rate of unemployment by 0.3% over two years.
• There is no stimulative effect from cutting the deficit.
• Cutting spending has a less negative effect than raising taxes. However, other policy responses - such as lowering interest rates - mitigate the effects of cutting spending.
• Cutting different types of spending has different responses. Cutting wealth transfer, i.e. unemployment insurance, has little if any effect, and may be positive. Cutting government consumption, i.e. firing government workers, has a negative effect. Cutting government investment, i.e. infrastructure or education, has the greatest negative effect.
• Cutting the deficit when interest rates are at or near zero most likely has a much worse effect than when interest rates are higher.
• Though negative in the near-term, cutting government spending is beneficial long-term because it lowers interest rates and lowers taxes.

Based on a historical analysis of fiscal consolidation in advanced economies ... fiscal consolidation typically reduces output and raises unemployment in the short term. At the same time, interest rate cuts, a fall in the value of the currency, and a rise in net exports usually soften the contractionary impact. Consolidation is more painful when it relies primarily on tax hikes; this occurs largely because central banks typically provide less monetary stimulus during such episodes, particularly when they involve indirect tax hikes that raise inflation. Also, fiscal consolidation is more costly when the perceived risk of sovereign default is low. These findings suggest that budget deficit cuts are likely to be more painful if they occur simultaneously across many countries, and if monetary policy is not in a position to offset them. Over the long term, reducing government debt is likely to raise output, as real interest rates decline and the lighter burden of interest payments permits cuts to distortionary taxes. ...

[F]iscal consolidation is typically contractionary. A fiscal consolidation equal to 1 percent of GDP typically reduces real GDP by about 0.5 percent after two years. The effect on the unemployment rate is an increase of about 0.3 percentage point after two years. The results are statistically significant at conventional levels. Overall, the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data. ...

following main results emerge from the analysis:

•• Spending-based adjustments are less contractionary than tax-based adjustments. In the case of tax-based programs, the effect of a fiscal consolidation of 1 percent of GDP on GDP is –1.3 percent after two years. In the case of spending-based programs, the effect is –0.3 percent after two years, and is not statistically significant. Similarly, while deficit cuts that rely on tax hikes raise the unemployment rate by about 0.6 percentage point, spending-based deficit cuts raise the unemployment rate only by about 0.2 percentage point. However, as will be shown below, a key reason the costs of spending-based deficit cuts are relatively small is that they typically benefit from a large dose of monetary stimulus, as well as an expansion in exports.

•• Domestic demand contracts for both types of fiscal consolidation, but by more in the case of tax-based packages. In particular, in the case of spending-based measures, domestic demand falls by about 0.9 percent after two years, whereas the decline exceeds 1.8 percent in the case of taxbased packages.

•• A rise in net exports mitigates the impact of the consolidation on GDP in both cases. However, there is a considerably larger improvement in exports associated with spending-based measures than with tax-based measures, whereas imports fall more for tax-based adjustments.

Why are spending-based adjustments less contractionary?

Much of the difference is due to the response of monetary conditions to fiscal consolidation: interest rates and the value of the currency tend to fall more following spending-based consolidation. Existing estimates in the literature can provide a rough sense of how much of the difference in output performance stems from the difference in monetary conditions. The difference in interest rate responses between tax-based and spending-based fiscal consolidation is about 50 basis points in the first year. Meanwhile, the output cost for tax-based consolidation exceeds that for spending-based consolidation by about 0.3 percentage point in the first year and by about 1 percentage point in the second year. Therefore, for the difference in output outcomes to be attributable entirely to the different monetary policy responses, a 100 basis point rise in interest rates would need to reduce output by about 0.6 percent in the first year and 2 percent in the second. Such impacts are within the range of estimates found in the empirical literature, though toward the high end.26 Thus, it appears that the difference in monetary policy responses accounts for much, though probably not all, of the difference in output performance. ...

The results reported above suggest that spending-based measures are less contractionary than tax-based measures, but do the effects differ across different types of spending cuts? In particular, a number of studies, such as Alesina and Perotti (1995), predict that spending-based adjustments have relatively benign effects if they involve cuts to politically sensitive items, such as transfer programs, or government consumption, such as the public sector wage bill. The key idea is that cutting politically sensitive items may signal a credible commitment to long-term deficit reduction and that, in these cases, positive “non-Keynesian” confidence effects offset the negative “Keynesian” impact on aggregate demand. On the other hand, cuts to less politically sensitive items, such as government investment, might have weaker confidence effects. To investigate this possibility, we divide the spending-based adjustments into three groups: those that rely mainly on cuts to government transfers (31 percent of all spending-based packages), those that rely mainly on cuts to government consumption (46 percent), and those that rely mainly on cuts to public investment (9 percent). The estimated impact on output of these three types of deficit cuts provides some evidence suggesting that spending cuts based on cuts to government transfers are relatively benign. In particular, the point estimates indicate a modest expansion. For adjustments based mainly on cuts to government consumption or investment, the output costs are larger. However, the estimates ... are based on a small sample of observations for which we have details regarding the types of spending cuts implemented. Hence, these results should be interpreted with caution. In particular, even for the cases of consolidation based on transfer cuts, there is no strong evidence of expansionary effects, as the results are statistically indistinguishable from zero. ...

http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf

 

[Old Rocks]

Yet, if the cutting spending approach is taken, it will be done on those very areas that have the greatest negative effect. That is already the stated intention of one of the parties.

 

[KissMy]

Basically we have so much credit contraction that that it will take a negative 7% interest rate to make the economy grow. Since negative interest rates not possible the only thing we can do is weaken the currency by creating 7% more debt annually.

 

[iamwhatiseem]

So what we are really saying is we are in between a rock and a hard place.
No matter what the government does, cut taxes ir raise them...spend more or spend less...the end result is the situation worsens.
Well...you guys didn't know this prior to the recession? I can't believe that those that have posted in this thread..that I am somehow the only one that knew the economic flush was bound to drain. I have been saying since the late 90's that this country is in real trouble. I knew we had an unsustainable economy based on insane consumer spending levels financed by cheap debt. In essence, the population was spending their future income...spending more than they made.
The day finally arrived where people can't borrow what they use to...so....we have substantially less money in the system where many, many people haven't received pay increases in 3-4 years - or more.

I have struggled to find a way to fix the problem. But, I don't see any solution other than allowing the system to reset...which will indeed be painful, but the only way to solve the problem without creating a bigger one in it's place.

 

[Quantum Windbag]

Yet, if the cutting spending approach is taken, it will be done on those very areas that have the greatest negative effect. That is already the stated intention of one of the parties.

Thanks for not reading the article Toro posted and making an unintelligent response.

 

[editec]

Cutting spending in this economy makes as little sense as increasing taxes.

This economy is starved for CASH.

Jesus, how much simpler can one state it?

 

[KissMy]

Cutting spending in this economy makes as little sense as increasing taxes.

This economy is starved for CASH.

Jesus, how much simpler can one state it?

We can cut spending in areas such as government pensions, medicare, prescription drugs, unemployment, welfare, social security etc with little negative effect. Those savings along with more deficit spending can be used to subsidize hiring the unemployed to build new high tech infrastructure such as fiber to every home & smart electricity grid. Build more oil, gas & ethanol pipelines & build more wind farms.

Do away with the energy efficiency tax credit & go with direct energy efficiency payments. Half of the country pays no taxes so a $2,500 energy tax credits do no good unless you have to pay that much or more in taxes. Rather than giving a deduction of $80 per window & door replaced with energy saving ones, pay people $80 bucks for every one they have replaced. Do the same for wind & solar.

 

[Trajan]

But raises output and lowers real interest rates over the long-term. Also, lowering the deficit through tax increases is typically worse than by cutting spending.

For those who don't want to read the paper or the exerts below, the conclusions are as follows;

• Cutting the budget deficit will lower growth and raise unemployment over the next 1-2 years. The effects of cutting the budget deficit is to raise the rate of unemployment by 0.3% over two years.
• There is no stimulative effect from cutting the deficit.
• Cutting spending has a less negative effect than raising taxes. However, other policy responses - such as lowering interest rates - mitigate the effects of cutting spending.
• Cutting different types of spending has different responses. Cutting wealth transfer, i.e. unemployment insurance, has little if any effect, and may be positive. Cutting government consumption, i.e. firing government workers, has a negative effect. Cutting government investment, i.e. infrastructure or education, has the greatest negative effect.
• Cutting the deficit when interest rates are at or near zero most likely has a much worse effect than when interest rates are higher.
• Though negative in the near-term, cutting government spending is beneficial long-term because it lowers interest rates and lowers taxes.

Based on a historical analysis of fiscal consolidation in advanced economies ... fiscal consolidation typically reduces output and raises unemployment in the short term. At the same time, interest rate cuts, a fall in the value of the currency, and a rise in net exports usually soften the contractionary impact. Consolidation is more painful when it relies primarily on tax hikes; this occurs largely because central banks typically provide less monetary stimulus during such episodes, particularly when they involve indirect tax hikes that raise inflation. Also, fiscal consolidation is more costly when the perceived risk of sovereign default is low. These findings suggest that budget deficit cuts are likely to be more painful if they occur simultaneously across many countries, and if monetary policy is not in a position to offset them. Over the long term, reducing government debt is likely to raise output, as real interest rates decline and the lighter burden of interest payments permits cuts to distortionary taxes. ...

[F]iscal consolidation is typically contractionary. A fiscal consolidation equal to 1 percent of GDP typically reduces real GDP by about 0.5 percent after two years. The effect on the unemployment rate is an increase of about 0.3 percentage point after two years. The results are statistically significant at conventional levels. Overall, the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data. ...

following main results emerge from the analysis:

•• Spending-based adjustments are less contractionary than tax-based adjustments. In the case of tax-based programs, the effect of a fiscal consolidation of 1 percent of GDP on GDP is –1.3 percent after two years. In the case of spending-based programs, the effect is –0.3 percent after two years, and is not statistically significant. Similarly, while deficit cuts that rely on tax hikes raise the unemployment rate by about 0.6 percentage point, spending-based deficit cuts raise the unemployment rate only by about 0.2 percentage point. However, as will be shown below, a key reason the costs of spending-based deficit cuts are relatively small is that they typically benefit from a large dose of monetary stimulus, as well as an expansion in exports.

•• Domestic demand contracts for both types of fiscal consolidation, but by more in the case of tax-based packages. In particular, in the case of spending-based measures, domestic demand falls by about 0.9 percent after two years, whereas the decline exceeds 1.8 percent in the case of taxbased packages.

•• A rise in net exports mitigates the impact of the consolidation on GDP in both cases. However, there is a considerably larger improvement in exports associated with spending-based measures than with tax-based measures, whereas imports fall more for tax-based adjustments.

Why are spending-based adjustments less contractionary?

Much of the difference is due to the response of monetary conditions to fiscal consolidation: interest rates and the value of the currency tend to fall more following spending-based consolidation. Existing estimates in the literature can provide a rough sense of how much of the difference in output performance stems from the difference in monetary conditions. The difference in interest rate responses between tax-based and spending-based fiscal consolidation is about 50 basis points in the first year. Meanwhile, the output cost for tax-based consolidation exceeds that for spending-based consolidation by about 0.3 percentage point in the first year and by about 1 percentage point in the second year. Therefore, for the difference in output outcomes to be attributable entirely to the different monetary policy responses, a 100 basis point rise in interest rates would need to reduce output by about 0.6 percent in the first year and 2 percent in the second. Such impacts are within the range of estimates found in the empirical literature, though toward the high end.26 Thus, it appears that the difference in monetary policy responses accounts for much, though probably not all, of the difference in output performance. ...

The results reported above suggest that spending-based measures are less contractionary than tax-based measures, but do the effects differ across different types of spending cuts? In particular, a number of studies, such as Alesina and Perotti (1995), predict that spending-based adjustments have relatively benign effects if they involve cuts to politically sensitive items, such as transfer programs, or government consumption, such as the public sector wage bill. The key idea is that cutting politically sensitive items may signal a credible commitment to long-term deficit reduction and that, in these cases, positive “non-Keynesian” confidence effects offset the negative “Keynesian” impact on aggregate demand. On the other hand, cuts to less politically sensitive items, such as government investment, might have weaker confidence effects. To investigate this possibility, we divide the spending-based adjustments into three groups: those that rely mainly on cuts to government transfers (31 percent of all spending-based packages), those that rely mainly on cuts to government consumption (46 percent), and those that rely mainly on cuts to public investment (9 percent). The estimated impact on output of these three types of deficit cuts provides some evidence suggesting that spending cuts based on cuts to government transfers are relatively benign. In particular, the point estimates indicate a modest expansion. For adjustments based mainly on cuts to government consumption or investment, the output costs are larger. However, the estimates ... are based on a small sample of observations for which we have details regarding the types of spending cuts implemented. Hence, these results should be interpreted with caution. In particular, even for the cases of consolidation based on transfer cuts, there is no strong evidence of expansionary effects, as the results are statistically indistinguishable from zero. ...

http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf

of course initially there will be some pulling up short- as ALWAYS in ANY economy good or bad, when the federal tap is squeezed, there will be an effect.


I read the article Toro, no offense and you didn't write it but it sounds to me like they tried to cover every base possible yet as Iamwhatitseems inferred, and I will say straight out, everyone is smart after the fact, covering every base, and looking at the contributors and artilces and orgs they took it from, well........*shrugs*

As I posted , Dimon over at JPMorgan Chase, the more bullish of the crew has now basically thrown in the towel, the gdp for the next 3 quarters into March 2012 will average between his and Goldman's predictions on the rosy side- 1.5%.........

so, raise/ lower taxs, cut spending, don't....

here - broaden(loopholes closed, flat tax rate) , drop the corp tax rate to 15%, commit to the bush cuts for 5 years and as far as gov. spending , NO cuts BUT, NO BASELINE increases, for 5 years. period full stop.

 

[Trajan]

Cutting spending in this economy makes as little sense as increasing taxes.

This economy is starved for CASH.

Jesus, how much simpler can one state it?

The M2 is fine, better than fine, that aint it.

 

[KissMy]

I've got a lot of gold, farm land & houses, so I would love to see the Keynesian's go crazy.

 

[Truthmatters]

they have completely lost their minds.

They are in the haze of a permenant propaganda effort.

They will have to just fall on the trahheap of history.

Maybe we will luck out and they will follow the confederated to south America like after the civil war when they lose this debate nationally.

 

[Wiseacre]

Sometimes you gotta make the best of a bad situation. What approach moves us in the right direction at the most minimal cost? I've never thought we have to make huge spending cuts all at once, we should be able to do it wisely and in small enough increments so the least number of people are harmed. I don't think we have to balance the budget right now, let's do it gradually.

What we really need IMHO is a comprehensive plan that encompasses the whole enchilada - taxes, spending, housing, energy, defense, entitlements, everything goes on the table and we prioritize and
decide what to do and how to do it. Don't know if that'll happen cuz we're so divided, no matter what the decisions are there will be a lot of people who won't like it.

 

[rdean]

There is no cash.

The Republican's redistribution of wealth from the middle class to the top 3% took care of that. Socialism for the rich.

 

[Avorysuds]

LOL, no shit it will... Then it will correct itself, that's the whole idea!

I like it when Toro says all recession and all depressions are not the same as a reason why cutting taxes and cutting spending got the US out of a Depression so quickly in the 1920's... Yet we turn around and treat this recession/depression (built on debt) like FDR did his Depression. Of course the effects are the same, all this spending only floats the economy at its current level of suck, but anyone who suggests that we threat this economy like the 1920's depression is attacked.

My main point here is "duh." If we ended the wars what would all the troops do? They would push up unemployment and that's prolly a reason Obama starts new wars rather than ending any war. So should we never end the wars because it will cause higher un-employment? The answer is no, we should end the wars, we should also cut spending on programs like never ending welfare and allow the correction to happen. I think that many people are scared that if all this is done things will work out and that would destroy the Big Government "progressive/Neocon" utopia dreams.

What would all these *important* historians do if their great idea of “spend/invest/welfare” was never really the answer at all? Think of all the people whose opinion on which President was the greatest in US history, or people that push this idea FDR saved America with 12 years of a Depression that only ended after he fucking died.

This is why “small government” through cutting spending to something we can afford along with lower taxes will never really be done, it would virtually destroy the Neocons and Progressives from every gaining power again.

 

[CrusaderFrank]

I'm sure the analysis is crap. They "study" 33 economies. Seriously, who the fuck cares about economies 12, 24 and 31...what's the relevance?

The one relevant point, totally ignored, is USA in 1920-21. Spending cut, taxes cut, assets and labor allowed to reprice and unemployment dropped from 12% to 4% in 18 months.

Let's try eliminating outright 15% of Federal spending and whole departments including Department of Education.

Sell all of Fannie and Freddie asset at auction, allow 401(k) to be used for down payments close Fannie and Freddie Single family home window. Personally, I'd like to have it be a capital crime punishable by death for the GSE to ever buy or make a SFH loan again.

Obamacare --adios, replaced with the Whole Foods recommendation.

 

[Trajan]

Sometimes you gotta make the best of a bad situation. What approach moves us in the right direction at the most minimal cost? I've never thought we have to make huge spending cuts all at once, we should be able to do it wisely and in small enough increments so the least number of people are harmed. I don't think we have to balance the budget right now, let's do it gradually.

What we really need IMHO is a comprehensive plan that encompasses the whole enchilada - taxes, spending, housing, energy, defense, entitlements, everything goes on the table and we prioritize and
decide what to do and how to do it. Don't know if that'll happen cuz we're so divided, no matter what the decisions are there will be a lot of people who won't like it.

yes, ....look they have to know, the string has finally out on the entitlement state, we sued to talk in decades oh its 30 years away oh its 20 years away......now? its less than a deacde.

Europe started feeling the effects in the late 70's and it took hold and here they are, its not just the euro either, they would have individually hit the same wall we are anyway, just sooner.

the housing bubble also pushed up our time line.

and, hear me and hear me well, there will be another requirement or conditions created that fit almost exactly what prompted us to enact Tarp 1, for a TARP 2, only this time, the 'haircuts' will chop everyone, not just the suckers like you and me and we simply don't have the powder for another one.......

I used to think we were in the eye of the hurricane having to come out the other aside and thats what we were hitting........... right now? we may not have even entered the the eye yet, and the other side out? well, may be far worse than we ever imagined.

 

[expat_panama]

...Cutting the budget deficit will lower growth and raise unemployment...

That's crazy.

OK, so nobody knows what will happen in the future with deficits and unemployment, but we do know what's happened in the past with deficits and unemployment. In 2003 we had 6% unemployment and the rate fell as revenue shrank the deficit after tax rates were cut. When spending soared after the 2006 congressional election unemployment rose and with the 2009 tax hikes both the deficit and unemployment went ballistic.

We can't say for sure that changes in the deficit made unemployment follow suit. On the other hand we can say for sure that deficit cutting didn't increase unemployment and deficit spending didn't help unemployment.

 

[waltky]

It really went up instead of stayin' flat...

Real Unemployment Rate Rose in August to 16.2% -- 26 Million People
Tuesday, September 06, 2011 – The real unemployment rate actually rose in August, according to the Department of Labor, belying the fact that the official unemployment rate, 9.1 percent, remained flat while the economy did not create any new jobs on net last month.

According to the data from the Bureau of Labor Statistics, real unemployment rose to 16.2 percent in August, up from 16.1 percent in July and tying the 2011 record set in June.

The real unemployment rate is comprised of three different measures of the labor force that more accurately reflect who is really unemployed, as opposed to the official unemployment rate, which merely measures those who told the government they were unemployed and looking for work in the past month.

The real unemployment rate is comprised of the official unemployment rate, those employed part-time because they cannot find full-time work, and those marginally attached to the labor force: people who have stopped looking for work but would return to the labor force if jobs were available.

All told, the total number of Americans who are truly unemployed – those that make up the real unemployment rate – is now 26 million people, according to the Labor Department data.

Real Unemployment Rate Rose in August to 16.2% -- 26 Million People | CNSnews.com

See also:

DNC Chair Debbie Wasserman Schultz: Economy Is 'Continuing on the Upswing'
Tuesday, September 06, 2011 - Just days after the Labor Department announced zero job growth for the month of August, Rep. Debbie Wasserman Schultz (D.-Fla.), the chair of the Democratic National Committee, said that the economy is “continuing on the upswing" and that every economist "worth their salt" acknowledges that this is the result of the economic stimulus signed into law by President Barack Obama in 2009.

When Obama signed the American Recovery and Reinvestment Act in February of that year, the national unemployment rate was 8.2 percent. As the Bureau of Labor Statistics reported last week, the national unemployment rate was 9.1 percent this August, unchanged from July. Before Obama signed the economic stimulus, his top economic advisers predicted unemployment would stay below 8 percent if it were enacted. The Congressional Budget Office has estimated that the the stimulus cost $825 billion. During Obama's presidency, according to the U.S. Bureau of Economic Analysis, annualized growth in the real Gross Domestic Product peaked at 3.9 percent in the first quarter of 2010. By the first two quarters of this year, it had dropped to 0.4 percent and 1.0 percent.

Still, Wasserman Schultz, when asked on MSNBC on Tuesday whether the president could sell another jobs plan to Congress if it resembled the stimulus package, the DNC chair argued that the stimulus worked and is responsible for an economy she described as "continuing on the upswing." “The Republicans who think that the Recovery Act didn’t work are simply wrong,” said Wasserman Schultz. “The Recovery Act as of the beginning of this year created an additional 3.6 million jobs. The Recovery Act had a direct impact on making sure that teachers, firefighters, police officers were able to remain in their jobs. It begun--it helped begin to turn the economy around. Fifty percent of it was tax breaks to small businesses and to the middle class.”

Wasserman Schultz said Republicans cannot ignore the facts of success from the stimulus. “So, every economist you would talk to that is worth their salt acknowledges that without the Recovery Act we would not be continuing on the upswing,” Wasserman Schultz continued during an interview on Morning Joe. “We’d still be either stuck or spiraling downward. So the Republicans can’t make up their own facts. The bottom line is the Recovery Act had an impact.”

The non-partisan FactCheck.org said in an analysis in June that the stimulus failed to meet expectations. “CBO's high estimate is still short of the 3.5 million jobs that Obama had said would be created by the end of 2010, so it’s accurate to say the stimulus has failed to live up to initial expectations,” FactCheck.org said. “White House advisers wrongly estimated that the stimulus would bring the unemployment rate down to 7 percent — though they also thought the rate without the stimulus would be lower than it actually is, and they made clear that ‘substantial uncertainty’ surrounded those estimates.”

http://www.cnsnews.com/news/article/dnc-chair-says-economy-continuing-upswin-0

 

[pinqy]

It really went up instead of stayin' flat...

Real Unemployment Rate Rose in August to 16.2% -- 26 Million People
Tuesday, September 06, 2011 – The real unemployment rate actually rose in August, according to the Department of Labor, belying the fact that the official unemployment rate, 9.1 percent, remained flat while the economy did not create any new jobs on net last month.

According to the data from the Bureau of Labor Statistics, real unemployment rose to 16.2 percent in August, up from 16.1 percent in July and tying the 2011 record set in June.

The real unemployment rate is comprised of three different measures of the labor force that more accurately reflect who is really unemployed, as opposed to the official unemployment rate, which merely measures those who told the government they were unemployed and looking for work in the past month.

The real unemployment rate is comprised of the official unemployment rate, those employed part-time because they cannot find full-time work, and those marginally attached to the labor force: people who have stopped looking for work but would return to the labor force if jobs were available.

All told, the total number of Americans who are truly unemployed – those that make up the real unemployment rate – is now 26 million people, according to the Labor Department data.

Real Unemployment Rate Rose in August to 16.2% -- 26 Million People | CNSnews.com

I'm always amazed of the idiocy of people including people WHO HAVE JOBS and saying they're "really unemployed." It's ridiculous.

Yes the U-6 is a useful measure, but it is NOT a measure of unemployment and BLS certainly doesn't call it one.

 

[expat_panama]

...Yes the U-6 is a useful measure, but it is NOT a measure of unemployment and BLS certainly doesn't call it one.

The bls is upfront about their methodology at Labor Force Characteristics (CPS) and it's not rocket science. The unemployed are people willing, able, and looking for work. The U6 number adds in two other groups, those who're working and think they're worth more than what they're paid, and those not bothering to look for work who say they'd take a job if it were easy enough and it paid enough.

It's no wonder that the U6 is a LOT bigger.