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

[Wiseacre]

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.

The official unemployment index (U-3), based on a monthly survey of sample households, counts only people who reported looking for work in the past four weeks. It doesn't account for part-time workers who want to work more hours but can't, given the tight job market. And it doesn't include those who have given up trying to find work.

When the underemployed and the discouraged are added to the numbers, the unemployment rate rises to 16.6%. The Bureau of Labor Statistics, a unit of the Labor Department, began tracking this alternative measure -- known as the U-6 for its department classification -- in 1995 after economists lobbied for a method comparable to the way Japan, Canada and Western Europe count their unemployed.

Don't care what it's called, it is an alternative way to meansure real unemployment. Nothing wrong with taking into account those who are working part time but want full time jobs.

 

[expat_panama]

...Nothing wrong with taking into account those who are working part time but want full time jobs.

Then again we could just avoid the controversy and track the entire population not employed--

--putting unemployment around 42%.

 

[iamwhatiseem]

I have been saying for at least 2 years now that though obviously unemployment levels are damning - underemployment is a much bigger problem. The shear number of people in jobs that pay less than what their abilities are - is staggering.

 

[waltky]

Granny says, "Dat's right - Congress needs to get off their duffs an' do somethin'...

Bernanke calls long-term unemployment a national crisis and urges more help from Congress
September 28,`11 WASHINGTON — “Unlikely revolutionary”: Since he was selected in 2005 to replace Alan Greenspan as chairman of the Federal Reserve, Bernanke has made bold, unprecedented moves in an attempt to bolster the U.S. economy.

Federal Reserve Chairman Ben Bernanke said Wednesday that long-term unemployment is a “national crisis” and suggested that Congress should take further action to combat it. He also said lawmakers should provide more help to the battered housing industry. Bernanke noted that about 45 percent of the unemployed have been out of work for at least six months. “This is unheard of,” he said in a question-and-answer session after a speech in Cleveland. “This has never happened in the post-war period in the United States. They are losing the skills they had, they are losing their connections, their attachment to the labor force.” He added: “The unemployment situation we have, the job situation, is really a national crisis.”

Bernanke said the government needs to provide support to help the long-term unemployed retrain for jobs and find work. And he suggested that Congress should take more responsibility. Responding to a question, Bernanke said long-term unemployment, budgetary discipline and housing policy were the three most important areas where Congress could contribute to an economic recovery. “There are certainly some areas where other policymakers could contribute,” he said. Bernanke’s comments were his latest in a public effort to get Congress to act further to rejuvenate the economy. He suggested that the Fed can achieve only so much through policies that seek to lower long-term interest rates. “The Federal Reserve has made enormous efforts to try to help this economy recover and stabilize” though its control of interest rates, or monetary policy, he said. Those policies have driven rates to record lows. “Monetary policy can do a lot, but monetary policy is not a panacea,” Bernanke said.

On the housing crisis, Bernanke said strong government programs to help the industry recover would aid the Fed’s own efforts to boost housing by driving mortgage rates to their lowest levels in decades. In his speech, Bernanke said the United States and other rich nations could re-learn a few lessons from fast-growing developing nations. He said the successful emerging economies such as China had adopted disciplined budget policies, embraced freed trade, made public investments and supported education. “Advanced economies like the United States would do well to re-learn some of the lessons from the experiences of the emerging market economies, such as the importance of disciplined fiscal policies,” Bernanke said. But in the question-and-answer period, Bernanke cautioned U.S. lawmakers against cutting deficits too quickly to reduce budget deficits. He has said that could put the fragile economy at risk.

Bernanke noted in his speech that emerging markets such as China account for a large and growing share of the global economy, so they need to act accordingly. “With increasing size and influence comes greater responsibility,” Bernanke said. Emerging nations will be challenged in the future by their reliance on exports to drive growth, he said.. The Obama administration has been pushing the Group of 20 major economies, which includes traditional powers such as the United States and emerging economies such as China, Brazil and India, to boost domestic demand rather than relying so heavily on exports to rich nations.

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