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| Try Getting Your Hands Around This |
This post was initially supposed to be an in depth
analysis of the current Unemployment Rate.
Soon after starting my research, I found myself looking at a large pile
of goo (if you are unemployed you may substitute “poo” for “goo” or probably a
much stronger term). There have been
several articles recently about why the Unemployment Rate is not an accurate measurement
of this labor market. People are constantly
trying to adjust the rate based on a single factor. However there are many factors impacting the job
market and these factors are very difficult to measure.
Sure, you can still calculate the Unemployment Rate
percentage, but it is now just a statistic.
It is not an accurate indicator of the job market. It is useless to put it on a historical
chart. The recessions of the past
occurred primarily in a “blue-collar” labor force. The recession hit, workers were
laid-off. The recovery begins and people
returned to work, often at their previous jobs.
But the Great Recession hit all workers and created some dynamics that
are very different.
The Unemployment Rate is greatly impacted by the number
of people actively looking for work (the labor participation rate). Many people have stopped looking for work,
but for many different reasons. For
example, Fred the Engineer, age 59, was downsized from his job after 30 years
with his company. In previous recessions
layoffs were based on seniority, but in the Great Recession they were based on
salary. Fred looked for a job, but
nobody needs an aging engineer in a slow economy, so after exhausting his
severance and unemployment benefits, he decides to retire at age 62. He is not counted as “unemployed”, but he is a
“forced” retiree and would gladly be working if a job were available.
The labor participation rate is being impacted by these “forced
retirees”, people going on “disability” due to the more lenient government
standards, the discouraged workers who have temporarily stopped looking due to
the tepid job market. There are also
“mismatched workers” whose jobs were eliminated by new technology and who lack
the skills to function in the new economy.
If these people are younger, they may drop out of the labor force to be
reeducated, if they are older, they often become the long-term unemployed. And of course you have the “benefit riders”
that ride their benefits out to the end, before seriously looking for work.
The great majority of unemployed people are actively
searching for work and hate being without a job. However, in 2011 a construction worker told
me he wasn’t really seeking work because he was on the “Obama Plan” and was
enjoying his extended unemployment benefits.
Miraculously, he found a new job just weeks after his benefits ran out. So yes, it is true as many others have
pointed out: If you pay people to be unemployed, you get more unemployed
people.
Another factor that is difficult to measure is the
thousands of college graduates of the last five years who cannot find jobs in
their field of study. They either have
no job or are woefully “under-employed” which may mean a job in fast food. The underemployed (which aren’t accurately
measured) also include the “Fred the Engineers” who are not old or wealthy
enough to retire and are working full time at the local telemarking firm. It is taking some professionals longer than
four years to return to work in their field.
Since the Unemployment Rate is currently of marginal
value, we are left with the monthly jobs reports (from the government and
ADP). And this measures the number of
jobs creted, not the quality of these jobs.
Replacing a manufacturing job with a call center job is not an even swap.
The latest government report said 155,000 jobs were
created in December. This rate of job
growth is woefully inadequate to provide for the millions of people seeking work
(or better work). I am hearing about
more layoffs and hiring freezes from my local contacts. And the current plan for creating more jobs is
“there is no plan”.
We need more precise information to better gauge and
track the employment/unemployment situation.
Employment surveys need to ask people the reason they are not seeking
employment, if they would work if a job was available, and whether they are
“underemployed” if they have a job. There
is an opportunity here for a university or survey firm to create a new index. Hey, that would even create a few more jobs!
