Unemployment getting close to Depression figures when comparing apples to apples

[ScreamingEagle]

The latest unemployment numbers just came out, and they weren’t too good. Job losses, which had been slowing down for over a month, increased in speed again. The official unemployment rate, standing at 9.4%, looks set to increase when next released in early July.

But 9.4%, while bad, isn’t that bad, right?

After all, the Great Depression famously saw 25% unemployment at its height in 1932 and 1933. So this recession is bad, but nowhere near a depression… correct?

Sadly no.

You see, during the early years of the Clinton Administration, the way we measure unemployment changed. Discouraged workers – those waiting out the bad times – and the chronically unemployed – those who haven’t held a job in the past year – were dropped from the list.

Also, the underemployed were no longer counted. That means those with part-time work who wanted or needed to work full-time, couldn’t find better jobs. They might be paying the interest on their credit cards working nights at Denny’s, but they still need more work, and can’t find it.

Here’ what the new numbers mean to you and an easy way you can protect your portfolio from a prolonged economic downturn…


Same Unemployed, Three Different Numbers

All these categories of unemployed mentioned above were erased from the official unemployment rate – which the Bureau of Labor and Statistics (BLS) calls the U-3 rate. The BLS still uses a broader categorization of rates, which attempts to incorporate the underemployed workers back into the equation.

That rate? It’s called the U-6, and it stands at 16.4%.

That’s closer to the way we measured unemployment in the 1930s. But it still hasn’t gone all the way.

Economist Walter J. "John" Williams, graduate of Dartmouth’s MBA program and economic consultant to Fortune 500 companies, was invited to speak to the House of Representatives last year. His website, shadowstats.com, attempts to calculate economic figures in a manner consistent with past measurements.

For his unemployment charts, he adds in the last uncounted segment of unemployed workers – those who have been out of work for over a year. The range he’s arrived at, as of June 5, 2009?

Over 20%.

Frankly, it doesn’t matter how we count our unemployed – until we compare numbers to the past. But we’ve simply got to compare apples to apples to make real sense of the data.

And when economists throw the 9.4% official rate against the 25% rate of the Great Depression, they are being ingenuous at best.

The truth is, we’re somewhere between 16% unemployed, and the low 20s which isn’t too far off from that 25% rate. And knowing that the number of people losing jobs is still increasing, is very sobering fact.

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[Toro]

Williams is simply wrong, for a number of reasons.

First and foremost is that the composition of the labor market has changed.

This data only goes back to WWII, but as you can see, the percentage of the employable population that is employed is far higher now than it was in the 1940s

If you were to extend this data back to the 1930s, the ratio would have been either the same or lower than it was in the 1940s.

The reason why the percentage has risen so much is because women entered the workforce. When comparing unemployment during the Depression, women would not have been included in the workforce data when calculating unemployment because they weren't in the workforce.

Thus, Williams is correct in that we are comparing apples to oranges, but not in the manner he suggests. If you adjusted for all the women who were not working during the Depression, the unemployment would have been far higher than 25%. Thus, making the comparison of today to the 1930s is a specious comparison.

BTW, I've seen two signs at fast food places looking to hire people over the past few weeks. You can get jobs if you are not picky, at least where I live. That wasn't the case in the Depression.

 

[Care4all]

isn't the definition of a Depression just a prolonged Recession, regardless of what percentage unemployment gets up to?

 

[ScreamingEagle]

Williams is simply wrong, for a number of reasons.

First and foremost is that the composition of the labor market has changed.

This data only goes back to WWII, but as you can see, the percentage of the employable population that is employed is far higher now than it was in the 1940s

If you were to extend this data back to the 1930s, the ratio would have been either the same or lower than it was in the 1940s.

The reason why the percentage has risen so much is because women entered the workforce. When comparing unemployment during the Depression, women would not have been included in the workforce data when calculating unemployment because they weren't in the workforce.

Thus, Williams is correct in that we are comparing apples to oranges, but not in the manner he suggests. If you adjusted for all the women who were not working during the Depression, the unemployment would have been far higher than 25%. Thus, making the comparison of today to the 1930s is a specious comparison.

BTW, I've seen two signs at fast food places looking to hire people over the past few weeks. You can get jobs if you are not picky, at least where I live. That wasn't the case in the Depression.

Wouldn't Williams have known about the women figures? If they left out the non-working women in the 1930s count but included them in today's figures since most women work....wouldn't that have equalized things out percentage-wise in the comparison?

 

[Meister]

Under the obama administration numbers mean nothing anymore except that his likeablity is still high in the polls. That's the only number that counts, it's all about "hope and change". Besides...it's "Bush's fault" that these numbers are where they are, right? As long as a democrat is in office of the presidency, he can do whatever he wants...because they have the power and the conservatices just need to get over it because they lost the election.


That's really it isn't it?

 

[Toro]

Wouldn't Williams have known about the women figures? If they left out the non-working women in the 1930s count but included them in today's figures since most women work....wouldn't that have equalized things out percentage-wise in the comparison?

No, not necessarily.

Here is another question. There are hundreds of Ph.D.s who work calculating all these statistics. Do you think they aren't aware of what Williams is arguing?

 

[Big Black Dog]

Obama's wonderful stimulus spending is going to kick in any minute now (especially all the jobs created by the Green Industry) and there will be no more unemployment in the US. In fact, there will be great jobs for all the illegal aliens. Don't know who will pick all the veggies then... Be patient. Obama loves us and will take good care of us all... He's our Sugar Daddy. Now, aren't you glad you voted for him?

 

[WillowTree]

Under the obama administration numbers mean nothing anymore except that his likeablity is still high in the polls. That's the only number that counts, it's all about "hope and change". Besides...it's "Bush's fault" that these numbers are where they are, right? As long as a democrat is in office of the presidency, he can do whatever he wants...because they have the power and the conservatices just need to get over it because they lost the election.


That's really it isn't it?

oh! we still hope! for change? better throw in a healthy dose of

 

[ScreamingEagle]

Under the obama administration numbers mean nothing anymore except that his likeablity is still high in the polls. That's the only number that counts, it's all about "hope and change". Besides...it's "Bush's fault" that these numbers are where they are, right? As long as a democrat is in office of the presidency, he can do whatever he wants...because they have the power and the conservatices just need to get over it because they lost the election.


That's really it isn't it?

oh! we still hope! for change? better throw in a healthy dose of

praytell.....to Jesus or Mohammed?

 

[ScreamingEagle]

Wouldn't Williams have known about the women figures? If they left out the non-working women in the 1930s count but included them in today's figures since most women work....wouldn't that have equalized things out percentage-wise in the comparison?

No, not necessarily.

Here is another question. There are hundreds of Ph.D.s who work calculating all these statistics. Do you think they aren't aware of what Williams is arguing?

I'm sure they are.

But Williams says he is including those who were dropped from the unemployment figures under Clinton...such as the underemployed, the discouraged waiting out the bad times(the U-6 rate as compared to the U-3 rate) and those who've been out of a job for over a year...a total measurement which brings today's unemployment rate to 20%...and more similar to the way rates were measured back during the Depression years...

...I'm no PhD statistician but that seems a fairly reasonable assessment...

 

[Xenophon]

I hope this will change.

But somehow I know it won't.

 

[PubliusInfinitum]

Williams is simply wrong, for a number of reasons.

First and foremost is that the composition of the labor market has changed.

This data only goes back to WWII, but as you can see, the percentage of the employable population that is employed is far higher now than it was in the 1940s

If you were to extend this data back to the 1930s, the ratio would have been either the same or lower than it was in the 1940s.

The reason why the percentage has risen so much is because women entered the workforce. When comparing unemployment during the Depression, women would not have been included in the workforce data when calculating unemployment because they weren't in the workforce.

Thus, Williams is correct in that we are comparing apples to oranges, but not in the manner he suggests. If you adjusted for all the women who were not working during the Depression, the unemployment would have been far higher than 25%. Thus, making the comparison of today to the 1930s is a specious comparison.

BTW, I've seen two signs at fast food places looking to hire people over the past few weeks. You can get jobs if you are not picky, at least where I live. That wasn't the case in the Depression.

ROFLMNAO... Oh GOD! Now that's precious... My favorite liars are those who use charts and graphs to induce deceit... they are without a DOUBT the most pathetic of the bunch...

Hysterical Toro...

Tthat's top-notch lyin' right there... Really...

 

[woodjack]

I am interested in Obama's plan for illegal immigrants, if the numbers are correct there is about 10 million illegals in the US today. That number may be skewed the number of illegals may be higher closer to 15 mill to 20 mill. If Obama embraces citzenship for illegals our unemployment numbers will skyrocket because those indiviuals would now be legal and would have to compete against the rest of us for work, that is if companies stop the under the table practices which they would not because again it is a numbers game cheap labor is sought after. interesting to me since I heard him talk of immigration reform last week yet he did not give any specifics as usual.

 

[sealybobo]

I am interested in Obama's plan for illegal immigrants, if the numbers are correct there is about 10 million illegals in the US today. That number may be skewed the number of illegals may be higher closer to 15 mill to 20 mill. If Obama embraces citzenship for illegals our unemployment numbers will skyrocket because those indiviuals would now be legal and would have to compete against the rest of us for work, that is if companies stop the under the table practices which they would not because again it is a numbers game cheap labor is sought after. interesting to me since I heard him talk of immigration reform last week yet he did not give any specifics as usual.

This is an issue I don't agree with the Dems on, but I see where they are coming from at least.

The GOP wants the status quo. That's how they keep wages down. And they love the free healthcare we give illegals now, because they as employers don't have to pay. The tax payers pay. And we pay more this way because they go to the emergency room.

If they are documented, then the USA gets taxes from their labor and we know who they are when they go to the emergency room. Or if they get a driving ticket, they now have a record.

The status quo has to go. If you guys want to throw out all the illegals, I'm with you. That will bring wages up big time.....

And thats when right wingers shit their pants.

 

[woodjack]

If they are documented, then the USA gets taxes from their labor and we know who they are when they go to the emergency room. Or if they get a driving ticket, they now have a record.

The status quo has to go. If you guys want to throw out all the illegals, I'm with you. That will bring wages up big time.....

And thats when right wingers shit their pants.

yes sealybobo but as newly gained citizens they are exempt from taxes for up to 8 years and are subject to a host of benifits that the tax payers pay for. and the fact unemployment would skyrocket and with that many influx on our ecomonimy at this time would be very deterimental to all taxpayers via the host of citizenship programs that we would fund for well over 10 million people at the same time...blaa it is truly mindblowing ,,,, I suspect that the border has been corrupt for a very long time...and I do believe that politicians on both sides of the aisle benfit from the status quo via drug moneys and donations.....the simple fix would be to militarize the zone...would be easy to do and training for military units could be accomplished while actually doing a service to the nation....why then? because the status quo helps all these politicians that is the only logical reason since this has been a problem for a very long time and no one on either side of the aisle does the common sense approach to fix it...they are all in cahoots...yes they are all corrupt...I could fix the border in 6 months easily

 

[Toro]

I'm sure they are.

But Williams says he is including those who were dropped from the unemployment figures under Clinton...such as the underemployed, the discouraged waiting out the bad times(the U-6 rate as compared to the U-3 rate) and those who've been out of a job for over a year...a total measurement which brings today's unemployment rate to 20%...and more similar to the way rates were measured back during the Depression years...

...I'm no PhD statistician but that seems a fairly reasonable assessment...

Think about this argument though. Take a look at this graph again

If what he is saying is true, if those people were instead employed, the employment participation ratio would be at all-time highs. What does that say about how unemployment was calculated beforehand? It would imply that the way unemployment was calculated beforehand grossly was underestimated. And again, you get back to the argument that you are comparing apples with oranges when trying to parse through the methodologies of calculating unemployment.

 

[sealybobo]

If they are documented, then the USA gets taxes from their labor and we know who they are when they go to the emergency room. Or if they get a driving ticket, they now have a record.

The status quo has to go. If you guys want to throw out all the illegals, I'm with you. That will bring wages up big time.....

And thats when right wingers shit their pants.

yes sealybobo but as newly gained citizens they are exempt from taxes for up to 8 years and are subject to a host of benifits that the tax payers pay for. and the fact unemployment would skyrocket and with that many influx on our ecomonimy at this time would be very deterimental to all taxpayers via the host of citizenship programs that we would fund for well over 10 million people at the same time...blaa it is truly mindblowing ,,,, I suspect that the border has been corrupt for a very long time...and I do believe that politicians on both sides of the aisle benfit from the status quo via drug moneys and donations.....the simple fix would be to militarize the zone...would be easy to do and training for military units could be accomplished while actually doing a service to the nation....why then? because the status quo helps all these politicians that is the only logical reason since this has been a problem for a very long time and no one on either side of the aisle does the common sense approach to fix it...they are all in cahoots...yes they are all corrupt...I could fix the border in 6 months easily

I agree, bad idea. We need to call like we did in 2005. But remember, all they did was pass a bad immigration bill and nothing changes.

We need to go after employers. Fine the fuck out of them if they are caught hiring illegals.

 

[pinqy]

How many untrue claims are there here? Let's count.
Number 1.

You see, during the early years of the Clinton Administration, the way we measure unemployment changed. Discouraged workers – those waiting out the bad times – and the chronically unemployed – those who haven’t held a job in the past year – were dropped from the list.

There has never ever been a maximum time limit on how long you've been unemployed. If you are currently looking, you're unemployed. It doesn't even matter if you've never held a job. As for Discouraged Workers, before 1969 the definition of unemployed included people who were no longer looking for work because they did not believe work was available (what we now call Discouraged Workers), but the definition also stated that it woul usually only apply to some distressed areas, and in reality it was up to the individual interviewer as to how the person was counted. That part of the definition was dropped in 1969 (under Johnson, not Clinton) as being too subjective and except for temporary layoffs and people waiting to start new jobs, you had to have looked for work in the previous 4 weeks.

In 1976, BLS started publishing alternative unemployment measures, numbered U-1 to U7. The official measure was the U-5. The U-7 included Discouraged workers, defined as people who had not worked during the reference week, wanted a job and had previously (undefined period) looked for work, but hadn't looked in the last 4 weeks because they did not believe they would find work. During the 1994 redesign, new alternative measures were introduced, now U- to U-6 with U-3 as the official measure, and the definition of Discouraged was tightened up so that the person must have looked sometime in the previous 12 months. The reason for this is that if someone hasn't even looked for work in the last year, there conception of not being able to find work is not likely to be an accurate reflection of whether or not they really could, even assuming they are honest.

But that had ZERO effect on the official rate which already excluded discouraged workers. The overall redesign did have an effect, mostly through improvements in collection and processing. The only change in the official definition was that previously if you were waiting to start a job, you didn't have to have looked in the last 4 weeks to be unemployed while now you do. Oh, and the official measure from 1984 to 1994 was split into the U-5a and U-5b, with the "a" including military personel stationed domestically. The Military was removed from the population in 1994, going back to the old definition.

Number 2.

Also, the underemployed were no longer counted.

They've never been counted in the official measure because they are employed. Definitions must be clear and distinct. They are included in the U-6, so the numbers are available to look at, they're just too subjective to use as the official measure.

Number 3.

All these categories of unemployed mentioned above were erased from the official unemployment rate – which the Bureau of Labor and Statistics (BLS) calls the U-3 rate. The BLS still uses a broader categorization of rates, which attempts to incorporate the underemployed workers back into the equation.

That rate? It’s called the U-6, and it stands at 16.4%.

Neither the discouraged nor the underemployed were ever in the U-3 (which has only been the designation of the official measure since 1994), nor the U-5, the designation from 1976 to 1994. The Underemployed have never ever been counted as officially unemployed, and the Discouraged only inconsistanly so before 1969. Also, the U-6 includes a category never used before 1994; the Marginally Attached. These are people who say they want to work and are available to work and have looked sometime in the last year but not in the last 4 weeks, regardless of reason for not looking (unlike the discouraged workers).

Number 4

That’s closer to the way we measured unemployment in the 1930s. But it still hasn’t gone all the way.

We didn't really measure unemployment in the 30's. There were a few attempts, such as the 1930 Census and a 1936 Postcard Census, but the definition of Unemployed was very different and was basically asking if you had a usual occupation but were not doing it now. In 1940, with the start of what's now called the CPS, the idea of an activity based definition: "Did you work, did you look for work, etc" was first used. The numbers you see for unemployment in the 20's and 30's was imputed from Employment surveys and the 1930 and 1936 efforts in 1948. They are considered the official numbers, but they were not calculated at the time.

Number 5.

For his unemployment charts, he adds in the last uncounted segment of unemployed workers – those who have been out of work for over a year. The range he’s arrived at, as of June 5, 2009?

Over 20%.

Again, it doesn't matter how long you've been out of work to be considered Unemployed or Discouraged or Marginally Attached. What matters is whether or not you've looked for a job..in the last 4 weeks for Unemployed, last year for Marginally Attached (which includes Discouraged). What Mr. Williams does is take the U-6, makes up an estimate of Marginally attached who haven't looked in the last year, and adds it on. It's dishonest to claim that that's closer to historical numbers in that the U-6 includes the Underemployed, who have never been counted as unemployed, and all marginally attached, who had never even been counted before 1994, except for some of the Discouraged and only then before 1969.

Number 6

And when economists throw the 9.4% official rate against the 25% rate of the Great Depression, they are being ingenuous at best.

What's diingenuos is to try to claim that methodology used in the 30's and 40's, when statistics was not as developed a science as it is now, are more accurate or better.

Number 7.

The truth is, we’re somewhere between 16% unemployed, and the low 20s which isn’t too far off from that 25% rate. And knowing that the number of people losing jobs is still increasing, is very sobering fact.

The truth? We're talking definitions here...there's no single objective, handed down by God definition to say "this is the TRUE rate" But the official US definition is the same as the ILO definition and what most of the world uses.

Now I have cites . To look at past definitons, July 1960 Employment and Earnings, page 59 of the PDF (2-E of the journal) has the official definition for that year. The St. Louis Fed has PDF versions of all issues 1960-1980 and BLS has copies for 2007 on. These later ones include a history of major changes to the CPS since 1940 (page 180 of the March 2009 copy). Read the official definitions for yourself. Also of interest is the 1995 article on Alternative measures of labor underutilization

 

[pinqy]

On a positive note, at least nobody has claimed that people not collecting UI aren't counted. Whether or not someone has ever collected UI has never mattered.

 

[Toro]

Everyone here should thank pinqy for the excellent work he has done in explaining the statistical methodologies and clearing up some of the misperceptions regarding economic data.