Saturday, September 5, 2015

Putting the Current State of Unemployment in Perspective

Scott Sumner writes:
What is the total number of months during the Ford, Carter, Reagan and Bush I administrations, plus the first term of Clinton, when the unemployment rate was lower than today?
Answer:  1
(March 1989, when it was 5.0%)
(ht Tyler Cowen)

Note the current unemployment rate is 5.1%. Here's Ford to first term Clinton



  1. This would mean something if the calculation method and definitions were consistent. Today unemployed people are hidden away on various welfare programs and not counted for a variety of reasons.

    If the employment market were as tight as we are being told then salaries would be increasing as employers tried to outbid each other. But that doesn't seem to happening except in very limited areas. Thus there must be a supply of unemployed that aren't being counted that keep the prices down.

  2. I was going to make the same point. Mainstream economists actually believe that index numbers spread over a long series of time actually mean something, while all the time the methodology and the bean counting undertakings change ("improve") radically. Press them and they will admit this (as it is obvious) and then they go right back doing the same thing again -- because that is all they have to work with.

  3. Shadow Stats has available with no subscription an unemployment table from 1995 through August 2015 including U3, U6 and U6+ (U6+ is U6 plus long-term discouraged workers, who were defined out of official existence in 1994:

    Interesting that the difference between U6 and U6+ was less than 5 percentage points until 2011. Now the difference is closing on 15 percentage points. The U3 to U6 spread maintained about 5 percentage points until 2009 when it was about 10 percentage points and then closes back to about 5 percentage points between 2010 and now.

    Mr. Sumner is apparently using U3. I do not have a subscription to Shadow Stats so do not have the stats before 1995 but it seems that Mr. Sumners answer would be a bit more than 1 if he were to use U6 and a lot more if he were to include long-term discouraged workers, who were defined out of official existence in 1994.