Down for U is up

For the first time since the recession officially began in December 2007, the unemployment rate fell last month, from 9.5% to 9.4%. Professional optimists had already been declaring the recession over, and this welcome news added fuel to their fire. How good is this news, anyway?

As always, the first place is to look is the original report from the Bureau of Labor Statistics (BLS).   First, a few important component numbers:

  • -155,000 = change in total employment from June to July
  • -267,000 = change in total unemployment “
  • +637,000 = change in total number of people not in the labor force “

The first two numbers look good: the decline in employment is much smaller than in previous months, and the ranks of the unemployed fell by more than a quarter million. But the last number is the largest and strongly suggests that hundreds of thousands of people have simply given up looking for work. Small wonder, when there are 5.0 million Americans who have been unemployed for six months or more.  (That’s more than the total number of unemployed just a few years ago, I believe.)

The 9.4% unemployment rate is the seasonally adjusted version of the BLS’s standard rate, which does not include discouraged job-seekers and other “marginally attached workers” or involuntary part-timers. Of the BLS’s six different measures of unemployment, all improved slightly or stayed the same if you look at the seasonally adjusted data. If you look at the unadjusted data, which look at the number of actual unemployed, you see practically no change from June: the unadjusted standard unemployment rate was unchanged at 9.7%, and the comprehensive “U-6” unemployment rate (all unemployed and underemployed and discouraged job-seekers, etc.) was unchanged at 16.8%.

I am pleased that President Obama, while saying the worst may be over, said he will not consider the recession to be over until the economy stops losing jobs. And give him credit for noting earlier that unemployment is a “lagging indicator,” which is correct.  Often the unemployment rate does not stop rising until more than a year after GDP has started to pick up. A job is about the most basic thing the economy can deliver to a person, so a jobless recovery is no reason to declare “mission accomplished.”

A striking set of statistics appear in the BLS’s breakdown of unemployment by educational attainment. For people 25 years and older, the July unemployment rates were as follows:

  • 15.4% for high school dropouts
  • 9.4% for people with a high school diploma
  • 7.9% for people with some college
  • 4.7% for four-year college graduates (note: that figure is nearly twice as high as a year ago)

“Don’t be a dropout” has always been good advice, but in this depression staying in school makes even more sense. To the extent that the lower labor force participation rate reflects people staying in college or grad school or returning to school, it’s a healthy development.

***

The source of today’s title:

Or here, as covered by those boys from Athens, Georgia:

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3 Responses to “Down for U is up”

  1. Mark Eanes Says:

    The “official” unemployment statistic that is so often quoted seems largely inadequate to measure the true state of the economy. Likewise, it seems equally inadequate to compare economic states over time. I’m glad you posted other unemployment statistics that reveal a more realistic view of how things actually are.

    The desire to have a job, more specifically our desire to be and feel productive, is one of the fundamental aspects of our nature. I agree that no recession/depression should be declared over until this need is largely met. As such, it looks like we will be in the red awhile.

  2. democommie Says:

    Ranjit:

    I agree with Mark Eanes comment about unemployment statistics being somewhat inadequate. Otoh, most of the sheeple don’t WANT to know how bad things really are; and, folks that need to know the truth are able to figure it out.

    This has nothing to do with economics, unless your wine cellar is part of your net worth. I think you’ll enjoy the site.

    http://wine-tasting-reviews.com/find-a-wine/red-wines-reviews/robert-mondavi-private-selection-vinetta-2006.html

  3. Goswald Says:

    I think we are still comparing apples to apples. Whatever inconsistencies reside in previous numbers also reside in these. So there is cause for optimism. And optimism is the most significant ingredient to curing a recession.

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