January Unemployment Figures: Uglier Than the Early 1990s

It's thousands not millions, but still, bursting credit bubbles continue to rack up a toll:

Recession-battered employers eliminated 598,000 jobs in January, the most since the end of 1974, and catapulted the unemployment rate to 7.6 percent. The grim figures were further proof that the nation's job climate is deteriorating at an alarming clip with no end in sight.

The Labor Department's report, released Friday, showed the terrible toll the drawn-out recession is having on workers and companies. It also puts even more pressure on President Barack Obama to revive the economy.

The latest net total of job losses was far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.

If that "revival" is expected to come through more credit and monetary expansion and improvident spending and racking up further impossible debt that others are expected to take on at low interest rates, well, good luck.

Unemployment figures, in annual averages, since 1948. 1992 was the last year approaching this current rate, with 7.5. Worth bearing in mind that anyone over 33 years old has lived through worse--from 1975-83, the annual average was above or equal to 7.6 for six of those years. If we can just manage to avoid a hyperinflationary spiral, economies do tend to revive in a world where people still have desires for goods and services and the ability to work to provide them. But centralizing more and more current and future resources in the service of political concerns in Washington isn't the key to that.

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  • ||

    If ever we needed deep cuts in the corporate tax rate, to be in effect for the foreseeable future, it's right freakin' now.

    ...meanwhile, President Obama continues to pontificate on executive compensation as if that were the problem.

    I've said it before, really sorry President Obama got his Katrina day one in office, but life isn't fair. ...and it's time to do the smart thing.

    And the smart thing is lowering the penalty on the profits people make by investing in new employees. Really. Doing anything else without doing that doesn't make much sense.

    ...Blowing the deficit up with pork barrel spending anyway and not cutting the penalty on profits from new investments--well that would be incompetent.

  • ||

    If we can just manage to avoid a hyperinflationary spiral...

    Sorry, no. We've got stimulatin' to do.

  • robc||

    Ken Schultz,

    I thought his Katrina was the KY ice storm. He was in office for about a week before that happened.

  • Thorstein||

    All this means that rich people need to pay less taxes so that their wealth will increase to the point that it trickles down to poor people. There is no other way. We must appease the rich people.

    Besides a poor person can own a share of a stock and a rich person can decline to won any shares of any stocks so corporate tax rates are not a rich versus poor issue at all.

  • ||

    Mark my words:
    Inflation and Unemployment will exceed 10% in 2009


    It's already "baked in the cake". I'll give even money that unemployment hits 20% in 09. But I'll only bet in Krugerrands, and I get to hold the bet.

  • ||

    I thought his Katrina was the KY ice storm.

    Nope, Katrina is not just a natural disaster that FEMA doesn't resolve with a wave of the magic FEMA wand. FEMA is a natural disaster that FEMA doesn't resolve with a wave of the magic FEMA wand plus hostile wall-to-wall media coverage.

  • ||

    All this means that rich people need to pay less taxes so that their wealth will increase to the point that it trickles down to poor people.

    In contrast to the bailout, which is based on the premise that politically well-connected people should receive wealth transfers so that their wealth will increase to the point that it trickles down to poor people. Or over to the party controlling the purse-strings, whichever.

  • Thorstein||

    Exactly, RCD. If we tax poor people a lot, middle class people a little and rich people not at all, it will incentivize people to be productive and move up in their socioeconomic status so that their tax burden is reduced. Simple carrot and stick motivation. Why can't the Demmycrats ever understand that. It ain't rocket science.

  • boosh||

    Brian (and others)

    Has Reason ever done a piece on how unemployment numbers are cooked and how to adjust for that fact? Kevin Phillips' arguments about "Pollyanna creep" (Harper's article reprinted here) seem plausible to me -- the government cooking the books to make an administration's policies seem not so damaging? Quel surprise! Example graf:

    [I]n 1994, the Bureau of Labor Statistics redefined the workforce to include only that small percentage of the discouraged who had been seeking work for less than a year. The longer-term discouraged-some 4 million U.S. adults-fell out of the main monthly tally. Some now call them the "hidden unemployed." For its last four years, the Clinton Administration also thinned the monthly household economic sampling by one sixth, from 60,000 to 50,000, and a disproportionate number of the dropped households were in the inner cities; the reduced sample (and a new adjustment formula) is believed to have reduced black unemployment estimates and eased worsening poverty figures.

    This is why I am generally sympathetic to the combined unemployed/underemployed numbers coming out, because I feel they are closer to what would have counted as underemployed in the past. I don't have clear proof of that, just a faith in Pollyanna creep.

    bb

  • boosh||

    Forgot a link. Underemployment rate discussed here (CNN). The highest since 1994. The CNN article also notes the most long-term unemployed since 1983.

    bb

  • ||

    boosh,
    Interesting. On CNBC this morning they were saying that the market thinks the numbers are actually under counting employment. That's why we got a little rally going today.

  • ||

    I don't care if you're a Keynesian or if you believe in Helicopter Money, a deep corporate rate cut for the foreseeable future is what we need...

    Actually, cutting personal income taxes at a time when banks are having issues keeping within their reserve requirements and making loans because of all the bad assets on their books, that by itself would seem to make a lot of sense too...

    I mean, how worried should we be about the propensity to save when banks are struggling like mad to get all the deposits they can?

  • ||

    This is why I am generally sympathetic to the combined unemployed/underemployed numbers coming out

    They already do come out.
    Table A-12. Alternative measures of labor underutilization

    Does that make anyone feel any better?

    Disclaimer: I work next door, and may be susceptible to bias.

  • ||

    Oh, and the sample is at roughly 60,000 households again, thanks to SCHIP. If the new SCHIP bill passes, they might even expand the sample more!

    Isn't that exciting/harrowing?

  • Thorstein||

    Ken is right that we need to do everything we can to help the banks in their time of struggling. When people are struggling it is because they brought it on themselves, but when banks struggle it is because we are not a good enough society to deserve the good banks we have. If rich people have money they will give it to bankers so that the bankers can do their jobs. The easiest way to make sure rich people have this money is by cutting the corporate tax rate down to -10%. The negative rate will be sound reparations for all those years we forced corporations to pay taxes and shouldn't have!

    Also, war is good for the economy. Iran makes me nervous and scared. I am also worried they will invade Israel and do a new Holocaust because their Muslim religion makes them nutsy. A man is never unemployed when he is in the army!

  • ||

    Why does Thorstein's link go to Dave W.'s website?

  • Thorstein||

    Dave W. is the genius of patents and I hype his groundreaking work in the area every chance I get!

  • ||

    Dave W. is the genius of patents

    So very true.

  • ||

    Yeah, well, despite what Dave W. thinks, I think we should do the smart thing even it does, for some reason, help wealthy people.

    But the thing about marginal propensity and bank deposits, I'm not sure I get that...

    One of the banks I got to regularly will give you $50 in cash if you open an account and use direct deposit. ...talk about scrambling for deposits!

    But yeah, taking money from people to pay interest on the national debt, interest on money you borrowed so you could give it to banks? ...when if you'd left it with the people who earned it, a lot of that money would have gone to shore up the banks anyway?

    That's stupid.

    And the income of the people you're takin' it from really doesn't matter--it's still stupid.

  • ||

    But yeah, taking money from people to pay interest on the national debt, interest on money you borrowed so you could give it to banks?

    It is kind of interesting that the reason we need billions of dollars in bailout spending is to put money in the banks, but the reason we can't do tax cuts is that people might just put the money in banks.

  • zoltan||

    New Troll!!!!!!!!!!

  • Thorstein||

    But yeah, taking money from people to pay interest on the national debt, interest on money you borrowed so you could give it to banks? ...when if you'd left it with the people who earned it, a lot of that money would have gone to shore up the banks anyway?

    Careful, by this logic we would end up cutting income tax and even state sales tax. You were right the first time when you pinpointed that it is corporate tax rates that need to be cut. Corporations would not exist if it were not for the government. Businesses would all be commonlaw partnership without the government regulations that allow for their special existence. For a government to tax a corporation is like a parent looking to live off the income of its child. Morally repugnant!

  • ||

    Brian Doherty knows that the calculation of unemployment figures has changed numerous times since the 1940s, always in a manner that makes later years count fewer unemployed people than earlier years, but presents the figures without comment.

    Sleazy.

  • ||

    Even if the data did need to be adjusted, joe, I don't know that it wasn't.

    He gave a link.

    Can you show me that it wasn't adjusted for what you're talking about?

  • ||

    What do you mean "without comment"?

    http://www.bls.gov/opub/ee/empearn200812.pdf

    See page 176 (177 in the PDF) for "Historical Comparability".

    The reason it's not in the release is because it's LONG.

  • ||

    Don't make me start summarizing it here, because I might...

    "In 1953, the current 4-8-4 rotation system was adopted..."

    "In 1955, the survey reference week was changed to the calendar week including the 12th day of the month..."

    "In 1957, the employment definition was modified slightly...Persons on layoff with definite instructions to return to work within 30 days of the layoff date, and persons volunteering that they were waiting to start a new wage and salary job within 30 days of interview, were, for the most part, reassigned to the unemployed classification. The only exception was the small subgroup in school during the reference week but waiting to start new jobs, which was transferred to not in the labor force."

  • BDB||

    Still not the "worst since the Great Depression" since the early 80s were worse. This seems like 1991 not 1929.

  • ||

    Well that was Doherty's point, that anybody over 33 years old has seen as bad or worse.

    ...and there's nothing sleazy about it.

    And I don't see anything in the way the historicals were calculated that would make it sleazy at all.

  • Douglas Gray||

    Righ Joe, wrong Brian, the Stats were computed in a more realistic way back in 1975-83. Now a huge number of chronically unemployed are left off, due to the way the Clinton Administration started dealing with the Stats. The actual rate is probably at least 10-12% and rising.

  • Thorstein||

    Ken doesn't see any problems and neither do I. Higher unemployment make labor cheaper. Any statistical techniques used to make the unemployment number smaller just help the workingman!

  • boosh||

    some fed,

    Thanks for the historical link, which I'll try to take a look at later. But my question still stands: Is there an easy way to account for all the numbers fudging when comparing this year's numbers to the numbers from (say) the early 70s, 80s, and 90s? The little blurbs you included from the PDF don't sound promising. So if I can't do historical comparison, should I just stick to comparing numbers over the past 10 years at most, assuming it is unlikely that anyone could go longer than that without tinkering with the calculation? Or is there some better rule of thumb?

    As for the underemployed link, I like that page better than the CNN summary I linked to. Thanks.

    Also, Ken Schultz, if you're interested in how the unemployment rate may be fudged, follow my link to the Phillips article. It is from May 2008, full of humdingers like:

    Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession.

    You can judge his argument (which includes specific policy changes made by various administrations) at the link.

    Phillips isn't the only one to complain about this stuff, but I find him an entertainingly cranky guy and remember his articles. I'm still also curious if Reason has done a similar piece on fudged numbers, as that sort of story is in the magazine's wheelhouse.

    bb

  • BDB||

    Why am I not surprised Bubba was the one who started fudging the stats?

  • BDB||

    BTW, we can also be glad that we don't have hyper inflation and/or 20% interest rates.

  • ||

    So am I to understand that historical unemployment rates can't be used for comparison purposes...

    period?

    Not that I'm conceding anything here, but by itself, isn't the number of people out there actively seeking jobs relevant to something?

  • ||

    So what you're saying, some fed, is that even though the source he links to refutes the claims he makes in the blog post, he both makes them, and makes no reference to the existence of that problem.

    BDB | February 6, 2009, 11:49am | #

    Still not the "worst since the Great Depression" since the early 80s were worse. This seems like 1991 not 1929.


    We're not at the bottom yet.

    More jobs lost in December than November, most jobs lost in January than December.

  • ||

    First, I want to refer anyone concerned about the 1994 redesign (which is the focus of the Harper's article) to here:

    http://www.bls.gov/osmr/pdf/cp940100.pdf

    Specifically, page 9 for the overview of changes observed in the unemployment rate. They ran both the old and new surveys for a period of time (not on full scale) and wrote up the differences they found. There's other reports on this too, but this is the test of real evidence.

    BDB--
    Why do you think, just because it happened in '94, Clinton did it? I, for one, never expect the government to work that quickly.

    boosh--
    Is there an easy way to account for all the numbers fudging when comparing

    No. The paper linked above (and others that I can help you find--though the government's published papers are mostly available to everyone at BLS.gov) helps with the '94 change.

    should I just stick to comparing numbers over the past 10 years at most

    Regarding the national total rates (unemployment rate, employment-population ratio, labor force participation rate) I'd feel safe from 1994 to present. Alas, it's a survey, and has all the problems of a survey. On the plus side, it's cheaper than the Census, and you have a fighting chance through randomization of avoiding persistent biases like the 1990 Census undercount.

  • ||

    So what you're saying, some fed, is that even though the source he links to refutes the claims he makes in the blog post, he both makes them, and makes no reference to the existence of that problem.

    So am I to understand that historical unemployment rates can't be used for comparison purposes...

    So if I can't do historical comparison


    You can do some historical comparison. The official position, as well as I can understand it, is that the changes weren't huge--like, within a percentage point.

    The 1994 change, probably the largest and best examined of any of the other historical changes since 1948, tweaked the annual average unemployment rate up half a point when compared to the old design suring '93.

  • ||

    At the very least, the CPS (and every other economic data series) had to change over time as statisticians got a better understanding of statistics, computers became better, the sample size increased, the definitions became more concrete.

    I think the data today reflect an improvement over what used to be produced. Having historically comparable data, in that case, means having current data that are equally likely to misrepresent reality.

    Do I think Mr. Doherty is correct in his post? The numbers he cites are the best data we have available, but they aren't perfect. Of course, casualty figures for WWII (or Iraq!) aren't perfect either, or strictly historically comparable at a certain level! All historical comparisons of any data suffer from these issues. He's as correct as anyone making historical comparisons of data.

    I'm trained to take any statistics with a certain amount of credulity. I suggest you be the same.

    AND NEVER COMPARE UNEMPLOYMENT RATES ACROSS COUNTRIES!!!

  • ||

    "You can do some historical comparison. The official position, as well as I can understand it, is that the changes weren't huge--like, within a percentage point."

    So, to close up the methodology argument, is there anything there that would give reason to doubt Doherty's read of the rapid deterioration of the job market?

    ...reason to doubt Doherty's suggestion that credit and monetary expansion and further spending and the piling on of debt, that these things are unlikely to help with the unemployment picture?

    'cause I'm still not seein' it.

    He does suggest that many of us have lived through worse--is that what people are takin' issue with?

    Or is it just Pile on Doherty Day?

  • Auntie Flo\'||

    Or is it just Pile on Doherty Day?

    No, joe gets cranky when I come around to visit.

  • ||

    So, to close up the methodology argument, is there anything there that would give reason to doubt Doherty's read of the rapid deterioration of the job market?

    Depends on your level of tolerance. Do you have a confidence interval for evaluating policy interaction with the economy?

  • Waldo||

    If I only had a brain

    We just are a dumb country.

  • oat willie||

    So, when everyone runs out of unemployment and gives up looking for a job or is a "consultant" then we will be at 0% unemployment, OK, got it.

    Just wanted to get that straight with the new government cookbook math and all.

  • boosh||

    Not that I'm conceding anything here, but by itself, isn't the number of people out there actively seeking jobs relevant to something?

    Two answers.

    1) Yes.

    2) The government definition of the unemployment rate does not correspond with what I would consider "people actively seeking jobs." -- hence the discussion of the joint unemployed/underemployed rates. And while I appreciate "some fed"'s comments -- I agree about not comparing rates across countries -- I would want to a bit more proof that the definition changes don't cause fluctuations on the order of a few percent.

    b

  • economist||

    Just remember: If the stimulus passes and the economy doesn't recover, then it "wasn't enough".

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