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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.
|2.6.09 @ 9:30AM|#
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.
|2.6.09 @ 9:31AM|#
If we can just manage to avoid a hyperinflationary
spiral...
Sorry, no. We've got stimulatin' to do.
robc|2.6.09 @ 9:37AM|#
Ken Schultz,
I thought his Katrina was the KY ice storm. He was in office for
about a week before that happened.
Thorstein|2.6.09 @ 9:39AM|#
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.
|2.6.09 @ 9:41AM|#
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.
|2.6.09 @ 9:48AM|#
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.
|2.6.09 @ 9:50AM|#
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|2.6.09 @ 9:53AM|#
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|2.6.09 @ 9:53AM|#
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|2.6.09 @ 9:57AM|#
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
|2.6.09 @ 10:00AM|#
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.
|2.6.09 @ 10:06AM|#
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?
|2.6.09 @ 10:10AM|#
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.
|2.6.09 @ 10:16AM|#
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|2.6.09 @ 10:29AM|#
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!
Thorstein|2.6.09 @ 10:38AM|#
Dave W. is the genius of patents and I hype his groundreaking work in the area every chance I get!
|2.6.09 @ 10:46AM|#
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.
|2.6.09 @ 10:49AM|#
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.
Thorstein|2.6.09 @ 10:55AM|#
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!
|2.6.09 @ 11:05AM|#
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.
|2.6.09 @ 11:23AM|#
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?
|2.6.09 @ 11:26AM|#
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.
|2.6.09 @ 11:31AM|#
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|2.6.09 @ 11:49AM|#
Still not the "worst since the Great Depression" since the early 80s were worse. This seems like 1991 not 1929.
|2.6.09 @ 12:14PM|#
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|2.6.09 @ 12:17PM|#
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|2.6.09 @ 12:17PM|#
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|2.6.09 @ 12:17PM|#
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|2.6.09 @ 12:35PM|#
BTW, we can also be glad that we don't have hyper inflation and/or 20% interest rates.
|2.6.09 @ 12:43PM|#
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?
|2.6.09 @ 12:49PM|#
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.
|2.6.09 @ 1:05PM|#
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.
|2.6.09 @ 1:12PM|#
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.
|2.6.09 @ 1:40PM|#
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!!!
|2.6.09 @ 1:43PM|#
"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\'|2.6.09 @ 2:02PM|#
Or is it just Pile on Doherty Day?
No, joe gets cranky when I come around to visit.
|2.6.09 @ 2:43PM|#
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?
oat willie|2.6.09 @ 6:03PM|#
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|2.7.09 @ 12:14AM|#
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|2.7.09 @ 12:56AM|#
Just remember: If the stimulus passes and the economy doesn't recover, then it "wasn't enough".
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