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US unemployment

This page is about several unemployment measures from the Bureau of Labor Statistics, out of the Current Population Survey, including the one most commonly reported as the 'Unemployment rate'.

Summary

6 Aug 2014.

The unemployment rate rose from 4.4% in Mar 2007 to 10.1% in Oct 2009, but has been in a declining trend since, and now stands at 6.2%.

The unemployment rate usually quoted is technically U-3, the most restrictive of several unemployment measures, including only those who have looked for work in the last four weeks. Long term, peaks usually come at the end of, or following, recessions, and can be anywhere from 6% to 11%. Within a long trend in one direction a tick of 0.1 or 0.2 in the opposite direction is common.

The broadest general unemployment measure, U-6, is about 80% higher than U-3 and changes in a parallel fashion; for policy, the differences are important; for investing, the trends are the same. For the longer term health of the economy, it is notable that a third quantity, prime-age men 'Not employed' (including even those not looking for work) has oscillated around a rising 40 year trendline from about 8% in 1968 to about 13% in 2008. (Background)

Graph

6 Aug 2014. Data through Jul 2014.

Data are from the BLS.

Highlights

Entries below covered through 3 Jan 2009.

US broad unemployment rate (4 Aug 2009) U-6 includes all the people who are looking for full-time work but are unable to find it: the 'Unemployed' (must have looked for work in the previous 4 weeks), the 'Marginally attached' (looking for work but not in the last four weeks), and those working 'Part-time for economic reasons' (i.e. part-time but wanting full-time). From 1994, when the measure was instituted, to 2008, the range was about 7% to 12%. This measure is probably very important to watch for the long term economic health of the nation, and for social policy, but not for investing, as changes in U-6 are broadly parallel to changes in U-3. The economic-cycle variation in the number of those working part time for economic reasons is about five-fold greater than the variation in those marginally attached. The former is worth watching separately, as a leading indicator on both employer sentiment and worker income.


US not employed rate (3 Jul 2008) The fraction of the population that is not employed is significantly greater than that counted as unemployed, and also rising significantly over the last 40 years. The 'Not employed' category includes the 'Unemployed' (requiring that one has looked actively for work in the last four weeks), the 'Marginally attached' (looking, but not necessarily in the last four weeks) and those not looking for work. Over the period 1968 to 2008, the unemployed rate for prime-age (25-54) men was cyclical around a constant background mean of about 4%; the not employed rate was cyclical as well, but against a background mean that rose steadily from about 8% in 1968 to about 13% in 2008. While some of this increase is no doubt millionaire early retirees and stay-at-home dads, the NY Times claims (without giving sources) that “Various studies have shown that … these nonemployed workers tend to be those who have been left behind by the economic changes of the last generation.”


US unemployment background (11 Jul 2009) Most reported unemployment statistics are from the Bureau of Labor Statistics in the Department of Labor. All the BLS unemployment data are from the Current Population Survey, a monthly survey of a probability sample of approximately 60,000 households, conducted by the Bureau of the Census for the BLS. Data are collected by personal and telephone interviews. Response is voluntary, but only about 4% refuse. Roughly speaking, the BLS divides the population into the “Employed” (E), the “Unemployed” (U; must have looked for a job in the last four weeks), the “Marginally attached” (M; looking for a job but not in the last 4 weeks), those not looking for a job at all (N), and the institutionalized. The unemployment rate usually reported is U-3, including just the Unemployed (U / E + U). There is also a broader measure of unemployment, U-6, which includes the Unemployed, those working part-time for economic reasons (i.e. wanting full-time ; PTER), and the Marginally attached; these are all the people who are looking for full-time work but are unable to find it (U + PTER + M / E + U + M). There is one other statistic of interest, the “Not employed”. This includes those who are not looking for work (NLFW; so U + M + NLFW / E + U + M + NLFW). The survey questions and the definitions have changed over time. Probably the official unemployment rate has been pretty stable over time but, strictly speaking, current data is only comparable to data back to Jan 1994.


US unemployment rate (6 Aug 2014) The unemployment rate rose from 4.4% in Mar 2007 to 10.1% in Oct 2009, but has been in a declining trend since, and now stands at 6.2%.

The unemployment rate usually quoted is technically U-3, the most restrictive of several unemployment measures, including only those who have looked for work in the last four weeks. Long term, peaks usually come at the end of, or following, recessions, and can be anywhere from 6% to 11%. Within a long trend in one direction a tick of 0.1 or 0.2 in the opposite direction is common.


See also

Historically typical aftermath of systemic financial crises

3 Jan 2009. Paper presented at the American Economic Association meetings in San Francisco.

http://ws1.ad.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf

“The Aftermath of Financial Crises. Carmen M. Reinhart and Kenneth S. Rogoff”

“A year ago, we … presented a historical analysis comparing the run-up to the 2007 U.S. subprime financial crisis with the antecedents of other banking crises in advanced economies since World War II. We showed that standard indicators for the United States, such as asset price inflation, rising leverage, large sustained current account deficits, and a slowing trajectory of economic growth, exhibited virtually all the signs of a country on the verge of a financial crisis— indeed, a severe one. In this paper, we engage in a similar comparative historical analysis that is focused on the aftermath of systemic banking crises. In our earlier analysis, we deliberately excluded emerging market countries from the comparison set, in order not to appear to engage in hyperbole. … In fact … the antecedents and aftermath of banking crises in rich countries and emerging markets have a surprising amount in common. … this study … includes a number of recent emerging market cases to expand the relevant set of comparators. Also included in the comparisons are two prewar developed country episodes for which we have housing price and other relevant data. …

[a previous study] included all the major postwar banking crises in the developed world (a total of 18) and put particular emphasis on the ones dubbed “the big five” (Spain 1977, Norway 1987, Finland, 1991, Sweden, 1991, and Japan, 1992). It is now beyond contention that the present U.S. financial crisis is severe by any metric. As a result, we now focus only on systemic financial crises, including the “big five” developed economy crises plus a number of famous emerging market episodes: the 1997–1998 Asian crisis (Hong Kong, Indonesia, Malaysia, the Philippines, and Thailand); Colombia, 1998; and Argentina 2001. These are cases where we have all or most of the relevant data that allows for thorough comparisons. Central to the analysis is historical housing price data, which can be difficult to obtain and are critical for assessing the present episode. We also include two earlier historical cases for which we have housing prices, Norway in 1899 and the United States in 1929. …

[The criteria for inclusion of a crisis are not given, but the main one is probably that total losses are as large as total bank capital. In a closely related paper (http://ws1.ad.economics.harvard.edu/faculty/rogoff/files/This_Time_Is_Different.pdf), Reinhart and Rogoff say, “For post-1970, the comprehensive and well-known study by Caprio and Klingebiel—which the authors updated through 2003—is authoritative, especially when it comes to classifying banking crises into systemic or more benign categories”. The original Caprio and Klingebiel paper is “Caprio, Jerry and Daniela Klingebiel (2002), “Episodes of Systemic and Borderline Financial Crises”, In: Daniela Klingebiel and Luc Laeven (Eds.), Managing the Real and Fiscal Effects of Banking Crises, World Bank Discussion Paper No. 428, Washington, D.C.”, at http://info.worldbank.org/etools/docs/library/83851/WBDP428.pdf. In that paper, Caprio and Klingebiel say, “The following table presents information on 113 systemic banking crises (defined as much or all of bank capital being exhausted) that have occurred in 93 countries since the late 1970s.”]

On average, unemployment rises for almost five years, with an increase in the unemployment rate of about 7 percentage points. … these historical comparisons were based on episodes that, with the notable exception of the Great Depression in the United States, were individual or regional in nature. The global nature of the crisis will make it far more difficult for many countries to grow their way out through higher exports, or to smooth the consumption effects through foreign borrowing.”

[Follow link above to the publication to see a chart showing the employment rise in percentage points and the duration of the increasing unemployment, for a number of cases.]