Wednesday, October 19, 2011


I have some good news for us - unemployment has really only risen by about 3%.   But some bad news - the length of time people remain unemployed has doubled.

Part of the problem is that people usually quote the Unemployment numbers, which only count the number of people looking for work.  It ignores everyone that has given up.  More importantly, it also ignores all retired people, college kids, the military, infants, and a bunch of other things.    Unemployment numbers are really about how many people are unhappy with being unemployed.  It is important for politicians seeking to get re-elected, but not that much for economists.

A better statistic is the Civilian Participation Rate.  That number is pretty inclusive - it includes stay at home moms, senior citizens and college kids.  But it still does not include kids under 16, prisoners or military personal.  It doesn't really matter if your unemployment number is 1% or 80%, what matters is how many people are working to support the unemployed.  If you have a Civilian Participation rate of 10%, then every 1 working person is struggling to support 9 other people - and you are in deep trouble, tax wise.  If your Civilian Participation rate is 75%, then 3 people are supporting 1 person, and you are fairly flush tax wise.  Even if you have an unemployment rate of 15%, it won't matter. 

(Source for this article)

The Civilian Participation Rate has fallen from a high of 67% (Good old Bill Clinton) to a low of 64%, the lowest since the 1980's (Ronald Reagan presided over this dark time in US history).  That means that only 64% of the working age, non-military US population has a job.   But note that's only a fall of 3%.  So honestly, this recession is not as bad as some would think.  During that same time, unemployment has rose from about 4% to a 10% high.  Note the unemployment rate change is twice as much as the participation rate change - in part because so many people in our culture never had a job.  About half the population never was looking.   It also means that no, the unemployment numbers are not being affected by a large increase in the number of people who gave up.

On the other hand, the length time people are being unemployed has skyrocket.  Before the recession, people usually were unemployed for about 10 weeks.  The highest it had ever averaged was about 13 weeks back in the early 1980's.  But now it hit 25 weeks as the average.  That's about twice as much as the previous high.  That is a big change.

The difference between this recession and the good times is 3 more unemployed people out of every hundred.  So this recession does not really have a lot more people out of work - what it has is a lot more people that want jobs that can not get them.   Honestly back in the evil old Ronald Reagan recession (which to be honest was probably as much about Carter's mistakes as the current one is about George Bush's mistakes.), there were just as many people working.  A major difference is who is unemployed - gender wise.  Back under Reagan, women stayed home and liked it.  Now, the men are staying home and not liking it.  Not liking it for half a year.

Contrast this with corporate profits and you understand why the unemployed people are upset.    Corporate profits are continuing on their same path of ever increasing profits.  Oh, they got hit in 2008/2009 but are fully recovered.  And the CEO's are getting paid more.  CEO's pay increase is better than inflation, better than the corporate profit increase, and even better than the Stock Market.   (Will someone let me buy options on my CEO's salary?  Please?)  But regular wages have dropped.  Why?  Because business men know that the unemployed people are REALLY desperate, even if there are not all that more of them.

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