I agree that any decline in US manufacturing will not see a massive increase in unemployment. However I think that the decline of the manufacturing base has been soaked up by the growth in the service industry.
With a lot of the economy being driven by debt and consumer spending, I can see a very large amount of people being laid off service industries.
And while manufacturing might enjoy a low dollar, finding skilled workers (who have disappeared as manufacturing shrank) would be difficult, thus putting costs onto manufacturers. Moreover, the inflationary effects of a low dollar will inevitably result in higher interest rates over the long term, which would again put a brake on consumer spending.
My personal feeling is that 8% is likely to be exceeded. Some are saying that this is the worst economic downturn since the depression, which would mean that unemployment is likely to exceed the 10% plus highs of the Volcker recession.
Add Peak oil to the equation and you have the recipe for potentially high unemployment, followed by years of very stagnant economic performance, which would keep unemployment high over the long term.
I don't know how meaningfull the number is, anymore. In the 1930s, unemployment was a simpler statistic, I think. According to the old timers I've talked to: In those days, if a fella walked up to a farmhouse and offered to work for meals and a room, he would often get that much. The labor stats would not catch that in those days. Nowadays, BLS would say he's fully employed, and be quick to enter it into the tally.
The 1970s were very different, of course, and I'm not sure we'll approach those levels--but there will be pain, and plenty of it for everyone.
Add Peak oil to the equation and you have the recipe for potentially high unemployment, followed by years of very stagnant economic performance, which would keep unemployment high over the long term.
When Wall Street starts to "get" peak oil and factor that into their trading habits, that will be the end of credit and equity markets for years to come.
I also believe that we'll see a long-run improvement in manufacturing, as transportation costs shift efficiency considerations toward domestic production. But that will take two decades to spin up.
CR: However manufacturing employment will probably only decline slowly for two reasons: 1) the weak dollar is helping with exports...
I'm not so sure about this, for two reasons. First, the dollar has actually risen some the last couple months and is up about 5+% against the Yen.
Second, and more importantly, internal growth is slowing now just about everywhere and just about everywhere the sanguine crowd is pointing to the positive effect of exports. So not only are the big net exporters of the last few years going to continue to grow exports, even the net importers are going to grow exports,and with consumption slowing just about everywhere.
How exactly does that work?
If we grow exports in this environment, someone else is losing exports and their internal demand will slow. Meanwhile demand will be slowing due to the massive financial deleveraging going on, asset price deflation, etc.
The only way we get a big boost in exports is if the dollar really falls, say another 15%.
I agree with Kurtyboy and believe the decline in the dollar and surplus construction labor can accelerate that timeframe. This would also have the effect of balancing standards of living globally (which may result in steps back for the US of A)
I also worry that the market interference by the banks and gubmint may ultimately result in social consequences that trumps everything.
Agreed, Bob_in_MA. Actually I think Brad Setser had a relevant blog entry. He notes that China continues to grow its exports amid demand difficulty, which seems to engender a belief that RMB appreciation may slow. This may put a brake on our export growth to China and other countries. Couple this with demand destruction and, well, you said it already it.
There are two other demographic factors which are now restraining official employment. The first is the recent explosive growth in illegals working in the States, which is now being drawn back. As those people leave or are forced out, there is a replacement effect for legal residents. The second is the age of the working population - a lot of people will simply retire and again the replacement effect will boost employment.
Well over 10 million illegals were working the US by any measure. If 2 million of those leave, it's a heck of a shock absorber for "official" employment.
unfortunately, we'll never know for sure as many will agree that the books are cooked and skewed, blued and tattooed with imprimatuer of officialdom, followed and analyzed, parsed and dissembled, scoped and projected etc.
I couldn't find stable work very often in the 1980's and early 1990's I would be laid off prior to 6 months most times. Therefore I was unemployed only once just not working for months on end the rest of the time. I think this will be much worse than the 80's or the early 90's.
Eric Jantzen over at iTulip has an excellent post on his analysis of the relationship between the bubble correction and employment going forward. He even does a state-by-state analysis on where he thinks the negative feedback from housing collapse will have the worst effect. Very detailed, lots of data and pretty (ok, not so pretty) charts, and an excellent context for what CR is looking at. The state by state predictions are (I believe) only available for free this weekend, but the post (and his historical analyses, for those not familiar with them) is going to be a great source for the uber-nerdly as well.
We are already above 8%, on the way to 20%+ in U-6 unemployment. Who cares if U-3 gets over 8% if it means milions of (former) middle to upper-middle class workers detasseling corn or some such work?
We are in store for a massive spike in discouraged workers dropping out of the labor force and slothing in the unfinished basements of their debt slave relatives living in their own broken property ladder hell.
But over all, total employment probably won't decline enough to cause unemployment to rise to 8%.
Posted by CalculatedRisk at 8:00 AM
The key word is total. I think some areas may see double that number.
Once upon a time you had mills, factories, etc and they went away. The areas left behind unemployment went way up until enough people gave up and either dropped from the numbers or moved.
Today we have a service economy. The factories in this case, the cubicle filled buildings are going away. They will not be coming back either.
Does the service sector include public employees...teachers, cops, firemen...as well as local bureaucrats? With property taxes falling, I expect cutbacks in all these jobs as well. How are these potential job losses counted?
With a deflationary atmosphere, the normal recessionary increase in college enrollment (especially at the graduate level) may not be forthcoming this time around.
And they're hiring big-time at the FDIC. Seems the most vacancies are in Los Angeles, San Francisco, Orange County CA, Seattle, Phoenix, Atlanta, Salt Lake City, and Montgomery, AL.
Employment will be tricky to determine. As the dollar declines, you may see more companies purchase (ie BUD) which will lead to employment cuts. I don't the unemployment numbers to increase as they are calculated but I do expect that corporate buyouts will increase, individuals will be encouraged to quit, graduating students to not find positions, and more companies will go out of buiness with their sub contractors going out of business.
Export job growth is holding up fine - I see it everyday. It is above even my wildest expectations .
If there is going to be mfg related job loss - look closer to home. If we get a real humdinger of a recession the domestic demand destruction will greatly outweigh export growth. I see signs of that too - more than is being reported.
But regardless - that domestic demand destruction has to happen. We can't continue to consume way more than we produce. Either we produce more or consume less - it really is that simple. I expect more of the latter & less of the former.
Given that assumption I expect more job loss and longer period of weak employment than the pundits are predicting. I think it will be especially difficult in the services sector because that is where most of our consumption lies - we borrow foreigners to flip burgers & pump gas for each other... not a sustainable practice.
We too are struggling on week by week to pay the bills and earn a little money for me.
Difference is, my house is paid off as of the first of the year. And the hub makes a fine living, and doesn't intend to retire for another 5 years, or possibly more if working for NASA continues to be fun. I could easily mooch off him and call myself a housewife (snicker, snort).
But the chill cold feeling of fear for those who are in my position, with a big mtg to pay, and no hub to fall back on, well, it must be horrible.
Lately people have been saying to me that they are working harder than ever, but making far less money than they used to.
If you look up the economic development firms in some of the small and mid-sized cities around the country it is shocking to see who the real major employers are in most of the country.
Usually it is Wal-Mart coming in with somewhere between 600-900 employees. If Wal-Mart starts closing down stores, there will be a feedback loop that would devastate cities even worse than major factory shut downs.
In my mind that is the true test of the resiliency of the American consumer and the potential depth of this recession.
I conclude you are being optimistic. Take the automotive sector for example. I've read that the number of jobs associated with total automotive industry activity (direct, indirect and induced) represent approx 5 percent of the private-sector jobs in the United States. We can readily see that much manufacturing associated with construction is going to tank. When business investment slows, that will be another hit. The world economies are starting to slow. That's likely to be a source of another hit.
I don't see the current recession as cyclical, rather structural, where personal consumption diminishes as a % of household income and the savings rate rises (perhaps substantially). How that directly relates to unemployment rising depends on many other factors.
An even larger point merits reptition until everyone understands it - the growth engines of an economic recovery has historically been pent up demand for houses and automobiles, but this time those sectors will continue to contract until they find some footing, but they won't shoot back up in a V-shape to boost employment.
So it'll be a drip-drip-drip rise in unemployment over the next decade and I would estimate the UR will reach 10% by 2013.
Lawyerliz writes:
You could almost call me unemployed.
We too are struggling on week by week to pay the bills and earn a little money for me.
Similar situation - self-employed and the companies I work for are imploding. But NOT due to the mfg environment (pretty solid really)... my three biggest 'clients' are heavily leveraged buyouts (one PE, one ESOP and one senior mgmt leveraged buyout - all carry way too much debt).
I think a lot of mfg companies are going to blame the 'mfg economy' when in fact the real fault lies in excessive leverage to support unrealistic mgmt salaries, bonuses & equity extraction.
I think every single one of these firms would be just fine (positive cash flow & maybe even show a paper profit) in spite of a recession IF they weren't so heavily leveraged.
Of the jobs that illegal immigrants perform or performed, how many of those jobs may disappear in an economic downturn? For example, if they employed were/are by landscapers, what happens if fewer people can afford to pay to have all their lawn/yard maintenance done for them? Or, in construction, if homewoners aren't doing as much remodeling? Won't some of those jobs disappear & would that not decrease the effect you mention? Is there any way of estimating how many of the jobs that illegal immigrants are presumed/assumed to be performing will disappear given X economic variables?
I think every single one of these firms would be just fine (positive cash flow & maybe even show a paper profit) in spite of a recession IF they weren't so heavily leveraged.
Too late to undo that now... next exit: BKville
Could the workers pension fund work an angle like an ESOP in a prepackaged BK?
The unemployment number is artificially low right now.
Because all those teens and twenty somethings who used to be the first ones laid off aren't even employed at all.
And all of us women who used to be laid off because "we can't lay off the men they have families to support" aren't employed either.
And all those illegals who never even get officially counted have mostly all been laid off already.
And companies are keeping employees on, even though they don't have work for them. I have contractors calling constantly trying to find jobs they can do in between other jobs they have scheduled. Some of them are really desperate, cutting insane deals just to get work.
And my friend in L.A. who has been laid off 11 months wasn't even counted in the stats anymore. He just re-applied for unemployment for the extended benefits, hope he gets it.
donna: I think the female participation rate is not quite as low as you present it. While it is probably true that most engineers, technicians, and workers in "brawn" jobs are men (and of course not to forget most of upper-level management anywhere), most other occupations are either predominantly women or staffed at least at par - HR, administrative, legal, sales, marketing, nursing, teachers, retail, ...
As for any social or "family values" considerations in layoffs, I don't know where (or when?) you would have ever seen that. Maybe I'm too young and there indeed was such a time.
As for the unemployment rate, I don't know where the myth originates that it has anything to do with unemployment benefits.
The measurement is based on a survey of 50000 (60000?) households, the criterion being largely "have you actively looked for a job in the past 4 weeks".
Unemployment benefits come into the picture only as far as they may be asking people to submit evidence of searching a job, compelling them to keep up appearances even with low prospects, as long as the benefits last, which will be reflected in the survey, statistically speaking.
There are other unemployment indicators, e.g. "new claims" and "continuing claims" which are based on benefits, but that's not the "headline" unemployment rate. And given that benefits last about 6 months max in general, claims probably underestimates unemployment quite a bit.
CR, I was about to get on my usual soapbox about UNemployment (the U3 v U6 fraud(IMO))in the context of your charts on employment but I wanted to crosscheck and establish the relationship between the two so I looked for the source of your data - but all you footnote is YOURSELF !
for what it's worth, information tech jobs in the bay area do not seem to be so affected -- solely from my perspective as a hiring manager. I am trying to convert a contractor to work full-time, but he tells me that people are begging him to work. (I told him he should convert now because the recession will get worse. Machievellian AND true -- for the win!)
My friends who have started small companies are asking me for leads. We have attractive positions at my (fairly prominent) company that are not filling, or even getting many resumes.
So, the difference between now and 2000-2002 for tech jobs is extremely sharp. People were begging for work then, and resumes would flood any job offer.
If you read this, perhaps you can explain a few things.
Why do you pick 8% unemployment as the indicator of a 'severe' recession?
Are you doing a historical comparison?
Do you compare the 8% figure to the comparable historical number when you make your analysis?
To me it seems that first one must assume that this 8% number is a valid indicator of a 'severe' recession. I have my doubts on that, with the way the numbers are cooked, but if it is indeed valid, then I guess we just sit back and watch the numbers.
Lots of folks in my neck of the woods are "underemployed", as in, they are listed as employed, but not making any money: realtors, mortgage brokers, roofers, restaurant owners and waitstaff, not to mention local owners of gas station/mini-marts (the money is in the snack junk, not the gas). Goobermint numbers are nothing but smoke and mirrors. People buying foreclosed homes at "a bargain" are wiping out somebodys elses equity/retirement in the neighborhood. The goobermints propping up of the stock market is absolutely criminal. Good time to be laying in supplies of basic neccessities. Things look to get real ugly down the pike.
RE Bear-- the birth-death adjustment is only used for preliminary estimates of nonfarm employment, which are based on a sample of employers. At the end of every year, the numbers are adjusted based on unemployment insurance tax reports from ALL employers. No adjustments are made to those numbers.
The methodology for measuring the headline unemployment rate has not changed since 1967. CM is correct that it is based on a monthly survey of 60,000 or so households (was 50,000 for a couple of years due to budget cuts).
I think unemployment will exceed 8%. There is a LOT of fat to cut in the retail/leisure hospitality sector (the starbucks layoffs are exhibit A). The entire city of Las Vegas is exhibit B.
Anonymous Coward: I think I can solve those two riddles for you:
(1) Contractors: There is increased demand for contractors, as opposed to employees. In some occupations there are virtually no advertised positions for employment, but the phone is ringing off the hook from body shops.
(2) Companies desperately seeking "talent" -- with N years of postgrad job history but N+5 equivalent or more years of "experience", and with the "hot skills" of the last less than N years. Another factor in this is that your "friends and associates" can yield only so much "talent" if you are not willing to advertise and deal with the deluge of resumes.
Anonymous Coward, looks like you are actually advertising, but research the following three things honestly:
(1) Are you looking for implausible combinations of skills and credentials? (Variation on the theme - is there a limited "static" labor pool from which you are recruiting?) You or your organization may be excluding, or repelling, many qualified candidates.
(2) Is your Staffing giving you all resumes, or are they "pre filtering" and screening out your good candidates? I have known of managers who frequently hired from Staffing's reject stack.
(3) Are you considering hiring from the unemployed? If not, you are merely poaching, and you have to offer something compelling enough to compensate for the risk of switching. An "industry standard" package may not do it.
And believe it or not, some "prominent" employers (or corporate divisions) have a bad name, for certain job descriptions. Of course I won't name them here.
No offense of course, I'm just laying out a few things without knowing your circumstances.
Anonymous Coward writes:
for what it's worth, information tech jobs in the bay area do not seem to be so affected -- solely from my perspective as a hiring manager. I am trying to convert a contractor to work full-time, but he tells me that people are begging him to work. (I told him he should convert now because the recession will get worse. Machievellian AND true -- for the win!)
Tell me honestly. I have Java, J2EE, program, project, product management skills etc. - sadly I think I'm worth $150K-$180K or $125/hr +expenses. I tell ya - when I tell this figure to the recruiters they run like hell - they quote 90K to 110K p/a to me. Well fuck you..
No worries - I earn money from "speculating" in the market.
...Anyone read that Harper's article a while back?...It questioned official Government #s....
I wonder what the real #s are.
Also, didn't I read somewhere that something like 50% of new jobs since 2000 were real estate related? (And you know that government wasn't far behind).
~110K is certainly the going rate for IIT grads. If you've got more productivity than them, feel free to sell yourself for that. Me, dunno . . .
Troy
Please source your data. Here is something from InformationWeek
For IT staffers, median base pay fell to $73,000, down from $74,000 the previous year. For managers, median base pay dropped to $96,000 from $97,000 last year. Median total compensation, including cash bonuses, also dipped a hair--down $2,000 to $76,000 for staff, and down $2,000 to $103,000 for managers. The survey includes more than 9,600 U.S. IT pros.
And I as a manager was NOT paying $110K for entry level graduates in Denver - ok, I only hired people with 4+ years of experience and I paid $75K-$90K p.a. - for very specific Java, J2EE experience.
I do agree with you of course - since people didn't want to pay me $150K-$180K ( yup I was asked to take a pay cut ) then I was free to say f*ck you and utilize my talents fulltime in the financial "speculation" field - and so far, 18 months later its turned out quite ok ( I'm alert to the luck aspect cf Fooled By Randomness; we'll know stuff with more certainty 10 years down the road ).
But somehow, I think its a waste that my software skills are kinda just not utilised - To overstate the point, its like a highly trained, experienced urologist with 1000+ RRP's under
his/her belt turning his/her back on that life-saving skill and sits around watching CNBC all day cos he makes more money that way..
The Harper's article (by Kevin Phillips) alleging twisted government statistics was laced with errors. I fact-checked what he said about the unemployment rate methodology being manipulated. He got a lot wrong.
sk: The question is, are the positions that you are rejecting filled with somebody else? Probably difficult to tell.
I know similar stories from hearsay, though more in the area of employment. There are cases where positions stay unfilled over long periods (clearly that requires that the position be advertised to begin with). That tells me that the work must be pretty discretionary and certainly not urgent. There is certainly a lot of lowballing going on. It's like in retail purchases where you can wait nearly forever until you get a bargain price when you don't really need the item or not immediately.
Likewise when positions are not even advertised and they are spending months on end to get elusive leads from internal "networking". No urgency.
With expected slumping aggregate demand or simply stagnant growth, we can expect even more categories of work and business products to become discretionary as people figure out if the did things a particular way the last 5 years, they can continue the next few years like that too.
Hi, 35 yrs exp doing 'Sr elec tech' work (Austin, TX) making $45K a year, mostly PWB layout. Job forecast is bleak, I've been out of work 2.5 months. Never seen things this bad, in the 2.5, 1 interview & 1 nibble. Yeah, no duh.
"Where are we going and what am I doing in this handbasket?"
cm- excellently stated viewpoint. I have no idea whether the positions are filled either.
Obviously I have a network - who wouldn't - but I don't embarrass them and they don't embarrass me by going thru a rigmarole {no, NOT rigmorale) - there seems to be an expectation - hmmmm describing the non-concrete conversation(s) is hard - there seems to be an expectation that compensation is a back-burner item, especially for salaried positions; the IT I knew all through the '80s and early '90s let me be pretty upfront about the money aspect ( but it also expressed how I would act in meeting my pre-agreed goals - MONEY matters! ) and the IT corporate world accommodated my style - now there's more sturm and drang on such stuff.
Which is OK - I'm busy practicing a new skill, that's very very different, very right brain versus the other left brain stuff.
But the BS about salaries in IT has to be confronted with real data - that I offered.
The equation is easy.
Baby boomers looking to retire find their fund is down 20-30-50%.
House value is down 20-30-50%.
So no retirement.
Therefore no employment for younger folks.
Young folks are spenders. Less spending
Less service jobs, less manufacturing jobs, less taxes
Less taxes, less Govt jobs.
Less Govt jobs, the greater the possibility that someone will leak the real unemployment rate.
ThaT will then jump to 15%+
no bloody worries.
The US is headed for REAL social strife.
regards.
One thing I forgot to point out in my earlier post was that a lot of employment in the service industries are flexible, which means that a person who works a 5 day week can be asked to drop down to a 4 or 3 day week.
It's a way to keep people employed, but pay them less.
I suspect that this behaviour might result in lower than expected unemployment figures. Nevertheless, median income levels would drop drastically.
sk: When in the process compensation is discussed seems to depend on the participants. Some clarify the "range" first, then proceed only when it's not a deal breaker. At least it shows clearly what it's about. The problem is some people are somewhat "flexible" on pay, but insist to be fairly paid for the work (and how much of it) they are asked to do, which becomes difficult when the work is not even discussed.
As for references, many recruiters and hiring managers are professional enough to only check them when they are really ready to make an offer, and will ask for them only when things become serious enough. But I have heard otherwise too.
At the end of the day, with what degree of courtesy people treat each other probably depends on their respective perception of leverage and how fungible/disposable the other party is.
I heard that during dotcom times, candidates would not even show up for second or even first interviews, and/or would place ultimatums. Clearly that's no longer happening now. Back then it would have been unthinkable for most (tech) employers to keep candidates "in the fire" for weeks or months and asking them to run through gauntlets of up to 4 (!) interview rounds.
Douglass Carmichael, that is incorrect. The labor force includes anyone 16 and older who is employed or unemployed. Check it out at U.S. Bureau of Labor Statistics
ScottB: Where "unemployed" is defined essentially as "having made specific efforts to find a job within the last 4 weeks". Which includes e.g. contacting or talking to employers, but excludes just browsing job boards. And it's based on a survey of just 50000 or 60000 households where systematic bias excluding high-unemployment areas/populations has been alleged.
cm, agreed, that is the definition of unemployed--same definition since 1967. It does include networking (asking friends/contacts about available jobs). The basic question is, did you engage in some job-seeking activity. Otherwise, if jobless, one is classified as "not in the labor force", and is not part of the unemployment rate calculation.
As to systematic bias--not sure if you are talking about Kevin Phillips' allegation that the sample was trimmed during the mid-1990s to lower the sample in central cities. I posed that allegation to a BLS staffer, who replied "Any increase or reduction in the CPS sample would not have affected unemployment rates for any particular racial or demographic group." The sample was increased again a couple of years ago. The sample is random/stratified, and is based on the 2000 Census to fairly represent the 16+ population. There is some bias in the Census, I do not know if BLS adjusts for that or not.
In my opinion, BLS bends over backwards to be non-political, knowing that if they get tainted, they are effectively toast. Various charges have been made over the years, but I don't think any have held up. That doesn't mean their methodologies are perfect, just that there isn't an agenda behind them.
ScottB: I didn't mean that the bias was deliberate. And yes, the inner-cities thing was a specific point I heard of. What I don't know but speculate is that due to the survey methodology, certain groups at the "fringe" of society were unemployment is pretty high are underrepresented (drifters, live-in relatives, generally those without stable address and landline phone number).
I'm only marginally familiar with stochastics, but it seems to me that most of the theorems about sampling, extrapolation (modeling), and confidence hold only when the "universe" has certain uniformity and homegeneity properties.
I have my doubts that a survey of 60000 households can adequately capture a population of 300 million.
But my beef is mostly with the definition of unemployment. It is overly restrictive and does not adequately capture the effects of underemployment and the supposedly-declining quality of jobs (i.e. pay and benefits).
Recognizing that the US is not Germany, in Germany part-time workers working less than 15 hours per week and desiring more hours (by way of announcing their availability for full-time positions to the Dept. of Labor) are included in unemployment.
Then there are potentially insidious provisions about "being available for work". One lady claimed on some other blog that a family member of hers was taking night classes (to update his "skills" as we are supposed to do on our own, are we not), and was told by the DOL that he would only be considered to be available for work when he would drop the classes to take a night shift job. That was for the purpose of unemployment benefits, not the unemployment survey though.
That's one other part of the unemployment definition -- you have to seek a job, and be "available for work" on short notice and probably on an everyday basis.
cm-agree with you that the official stats will not pick up those on the "fringe". Not sure how many fall into that category, how many of those meet the official definition of unemployed, etc. And some of those are employed, as well. As Nietzsche put it, all numbers are lies, without which we cannot live.
As far as 60,000 being adequate, we can agree to disagree on that. Most surveys are only about 400 in size.
In terms of underemployment, BLS publishes six unemployment rates every month. The headlines pick up one of them ("U-3"). U-6 includes adjustments for discouraged workers and those working part-time who want a full-time job.
No single statistic will reflect all that is going on in the labor market, so I'm not sure it's fair to object to unemployment on those grounds. The rate can "improve" at times because last month's unemployed give up looking for work, for example. And, as you point out, the rate says nothing about wages and benefits. None of the usual stats pick up on employers passing on more health care costs to employees by increasing the monthly paycheck deduction, etc.
I'm not an expert on benefits, but if I were the person in your example, I would have filed an appeal, and in most states I bet I would have won.
ScottB: Underlying the unemployment statistics is the definition of the "labor force", where the employment/population ratio has been conspicuously shrinking. I think there is substantial "shadow unemployment" beyond U-6, with people evading "proper" unemployment by getting into disability, early "retirement", casual and informal arrangements like Ebay trading or under-the-table work (doing jobs that are not available legally), or just getting by on less for periods while accepting that "making an effort" is largely a waste of time and money. But as those phenomena are not officially acknowledged, much less measured and studied, we are left to speculate, and cannot make definitive conclusions beyond anecdotes that are easily swept aside.
cm--You raise an interesting issue. I went through these stats a couple of months ago, even got some unpublished data from BLS. If you look at the change in labor force participation from 1997 to 2007, it is mostly due to the aging of the population. There is a ten point drop off in participation at age 55 (80 percent for 50-54, 70 percent for 55-59), and another 20 point drop off at age 60.
If you start back to 1980 and before, there has been greater deterioration in participation among men. BLS does an annual survey, and started asking in 1980 people who weren't in the labor force in the past year the reason for not working/seeking work. Almost all of the change has been in "disability". Don't know exactly what that means (diabetes? Vietnam/war-related? depression?). They could have named any number of other reasons (don't know if it's an open-ended question or multiple choice with "other"). Little change in 'because the economy is crap'. I'd love to see a research project around this.
ScottB: It probably means that there has been increased recognition, diagnosis, and accommodation of various disabilities relative to before, and quite possibly an increase in actual or new disabilities related to increased longevity, more sedentary work, and more work pressures/stress from more volatile labor and life circumstances.
It's probably also related to increased "discovery", diagnosis, and general "awareness" of ever more health issues and illnesses. Not necessarily causally, but certainly coincidentally.
Vietnam, I'm not so sure. People have served in WW2, but as opposed to Vietnam veterans, returned to a booming economy and the GI bill.
What I'd be concerned about is how many of those lost jobs trigger yet another default on a mortgage
second ?
I agree that any decline in US manufacturing will not see a massive increase in unemployment. However I think that the decline of the manufacturing base has been soaked up by the growth in the service industry.
With a lot of the economy being driven by debt and consumer spending, I can see a very large amount of people being laid off service industries.
And while manufacturing might enjoy a low dollar, finding skilled workers (who have disappeared as manufacturing shrank) would be difficult, thus putting costs onto manufacturers. Moreover, the inflationary effects of a low dollar will inevitably result in higher interest rates over the long term, which would again put a brake on consumer spending.
My personal feeling is that 8% is likely to be exceeded. Some are saying that this is the worst economic downturn since the depression, which would mean that unemployment is likely to exceed the 10% plus highs of the Volcker recession.
Add Peak oil to the equation and you have the recipe for potentially high unemployment, followed by years of very stagnant economic performance, which would keep unemployment high over the long term.
Plenty of good careers to be had in retail sales.
Let's see...cigaretts and a Slurpee... anything else?
Some thing's missing. At least 7 million workers, I'd say. Since 1980, probably 15 million.
I don't know how meaningfull the number is, anymore. In the 1930s, unemployment was a simpler statistic, I think. According to the old timers I've talked to: In those days, if a fella walked up to a farmhouse and offered to work for meals and a room, he would often get that much. The labor stats would not catch that in those days. Nowadays, BLS would say he's fully employed, and be quick to enter it into the tally.
The 1970s were very different, of course, and I'm not sure we'll approach those levels--but there will be pain, and plenty of it for everyone.
Add Peak oil to the equation and you have the recipe for potentially high unemployment, followed by years of very stagnant economic performance, which would keep unemployment high over the long term.
When Wall Street starts to "get" peak oil and factor that into their trading habits, that will be the end of credit and equity markets for years to come.
And that's the rosy picture.
I also believe that we'll see a long-run improvement in manufacturing, as transportation costs shift efficiency considerations toward domestic production. But that will take two decades to spin up.
CR: However manufacturing employment will probably only decline slowly for two reasons: 1) the weak dollar is helping with exports...
I'm not so sure about this, for two reasons. First, the dollar has actually risen some the last couple months and is up about 5+% against the Yen.
Second, and more importantly, internal growth is slowing now just about everywhere and just about everywhere the sanguine crowd is pointing to the positive effect of exports. So not only are the big net exporters of the last few years going to continue to grow exports, even the net importers are going to grow exports,and with consumption slowing just about everywhere.
How exactly does that work?
If we grow exports in this environment, someone else is losing exports and their internal demand will slow. Meanwhile demand will be slowing due to the massive financial deleveraging going on, asset price deflation, etc.
The only way we get a big boost in exports is if the dollar really falls, say another 15%.
I agree with Kurtyboy and believe the decline in the dollar and surplus construction labor can accelerate that timeframe. This would also have the effect of balancing standards of living globally (which may result in steps back for the US of A)
I also worry that the market interference by the banks and gubmint may ultimately result in social consequences that trumps everything.
Are thes numbers from BLS? If so, are they all (1970-2008) adjusted using Birth death model?
Agreed, Bob_in_MA. Actually I think Brad Setser had a relevant blog entry. He notes that China continues to grow its exports amid demand difficulty, which seems to engender a belief that RMB appreciation may slow. This may put a brake on our export growth to China and other countries. Couple this with demand destruction and, well, you said it already it.
Bob_in_MA writes:
The only way we get a big boost in exports is if the dollar really falls, say another 15%.
This is a very viable scenario.
USD may strengthen against some currencies but I think overall we are going to see this.
Love these pre-configured CR robo-posts. They are like messages from Hari Seldon during times of Crisis...
perhaps a jobless recovery out of the last recession leads to a full employment recession this time around.
USD has risen against the Yen and that's about it.
There are two other demographic factors which are now restraining official employment. The first is the recent explosive growth in illegals working in the States, which is now being drawn back. As those people leave or are forced out, there is a replacement effect for legal residents. The second is the age of the working population - a lot of people will simply retire and again the replacement effect will boost employment.
Well over 10 million illegals were working the US by any measure. If 2 million of those leave, it's a heck of a shock absorber for "official" employment.
well, you are more erudite than I on such matters
unfortunately, we'll never know for sure as many will agree that the books are cooked and skewed, blued and tattooed with imprimatuer of officialdom, followed and analyzed, parsed and dissembled, scoped and projected etc.
I couldn't find stable work very often in the 1980's and early 1990's I would be laid off prior to 6 months most times. Therefore I was unemployed only once just not working for months on end the rest of the time. I think this will be much worse than the 80's or the early 90's.
Eric Jantzen over at iTulip has an excellent post on his analysis of the relationship between the bubble correction and employment going forward. He even does a state-by-state analysis on where he thinks the negative feedback from housing collapse will have the worst effect. Very detailed, lots of data and pretty (ok, not so pretty) charts, and an excellent context for what CR is looking at. The state by state predictions are (I believe) only available for free this weekend, but the post (and his historical analyses, for those not familiar with them) is going to be a great source for the uber-nerdly as well.
i just reviewd chuckies campaign contributions for 2008. it looks like wachovia and wamu are next on chuckies plappermaul list.
they didnot contributed in 2008 according to the opensecrets.org
We are already above 8%, on the way to 20%+ in U-6 unemployment. Who cares if U-3 gets over 8% if it means milions of (former) middle to upper-middle class workers detasseling corn or some such work?
We are in store for a massive spike in discouraged workers dropping out of the labor force and slothing in the unfinished basements of their debt slave relatives living in their own broken property ladder hell.
But over all, total employment probably won't decline enough to cause unemployment to rise to 8%.
Posted by CalculatedRisk at 8:00 AM
The key word is total. I think some areas may see double that number.
Once upon a time you had mills, factories, etc and they went away. The areas left behind unemployment went way up until enough people gave up and either dropped from the numbers or moved.
Today we have a service economy. The factories in this case, the cubicle filled buildings are going away. They will not be coming back either.
Does the service sector include public employees...teachers, cops, firemen...as well as local bureaucrats? With property taxes falling, I expect cutbacks in all these jobs as well. How are these potential job losses counted?
With a deflationary atmosphere, the normal recessionary increase in college enrollment (especially at the graduate level) may not be forthcoming this time around.
And they're hiring big-time
at the FDIC. Seems the most vacancies are in Los Angeles, San Francisco, Orange County CA, Seattle, Phoenix, Atlanta, Salt Lake City, and Montgomery, AL.
Employment will be tricky to determine. As the dollar declines, you may see more companies purchase (ie BUD) which will lead to employment cuts. I don't the unemployment numbers to increase as they are calculated but I do expect that corporate buyouts will increase, individuals will be encouraged to quit, graduating students to not find positions, and more companies will go out of buiness with their sub contractors going out of business.
Export job growth is holding up fine - I see it everyday. It is above even my wildest expectations .
If there is going to be mfg related job loss - look closer to home. If we get a real humdinger of a recession the domestic demand destruction will greatly outweigh export growth. I see signs of that too - more than is being reported.
But regardless - that domestic demand destruction has to happen. We can't continue to consume way more than we produce. Either we produce more or consume less - it really is that simple. I expect more of the latter & less of the former.
Given that assumption I expect more job loss and longer period of weak employment than the pundits are predicting. I think it will be especially difficult in the services sector because that is where most of our consumption lies - we borrow foreigners to flip burgers & pump gas for each other... not a sustainable practice.
we borrow foreigners to flip burgers & pump gas for each other... not a sustainable practice.
Make that...
we borrow FROM foreigners to flip burgers & pump gas for each other... not a sustainable practice.
Though both versions are somewhat accurate.
You could almost call me unemployed.
We too are struggling on week by week to pay the bills and earn a little money for me.
Difference is, my house is paid off as of the first of the year. And the hub makes a fine living, and doesn't intend to retire for another 5 years, or possibly more if working for NASA continues to be fun. I could easily mooch off him and call myself a housewife (snicker, snort).
But the chill cold feeling of fear for those who are in my position, with a big mtg to pay, and no hub to fall back on, well, it must be horrible.
Lately people have been saying to me that they are working harder than ever, but making far less money than they used to.
If you look up the economic development firms in some of the small and mid-sized cities around the country it is shocking to see who the real major employers are in most of the country.
Usually it is Wal-Mart coming in with somewhere between 600-900 employees. If Wal-Mart starts closing down stores, there will be a feedback loop that would devastate cities even worse than major factory shut downs.
In my mind that is the true test of the resiliency of the American consumer and the potential depth of this recession.
I conclude you are being optimistic. Take the automotive sector for example. I've read that the number of jobs associated with total automotive industry activity (direct, indirect and induced) represent approx 5 percent of the private-sector jobs in the United States. We can readily see that much manufacturing associated with construction is going to tank. When business investment slows, that will be another hit. The world economies are starting to slow. That's likely to be a source of another hit.
We'll be lucky if it stops at 8! Enjoy your hike.
CR suddenly gone fishing.
FDIC crawling all over IndyMac.
Hmmm.
I don't see the current recession as cyclical, rather structural, where personal consumption diminishes as a % of household income and the savings rate rises (perhaps substantially). How that directly relates to unemployment rising depends on many other factors.
An even larger point merits reptition until everyone understands it - the growth engines of an economic recovery has historically been pent up demand for houses and automobiles, but this time those sectors will continue to contract until they find some footing, but they won't shoot back up in a V-shape to boost employment.
So it'll be a drip-drip-drip rise in unemployment over the next decade and I would estimate the UR will reach 10% by 2013.
Lawyerliz writes:
You could almost call me unemployed.
We too are struggling on week by week to pay the bills and earn a little money for me.
Similar situation - self-employed and the companies I work for are imploding. But NOT due to the mfg environment (pretty solid really)... my three biggest 'clients' are heavily leveraged buyouts (one PE, one ESOP and one senior mgmt leveraged buyout - all carry way too much debt).
I think a lot of mfg companies are going to blame the 'mfg economy' when in fact the real fault lies in excessive leverage to support unrealistic mgmt salaries, bonuses & equity extraction.
I think every single one of these firms would be just fine (positive cash flow & maybe even show a paper profit) in spite of a recession IF they weren't so heavily leveraged.
Too late to undo that now... next exit: BKville.
MOM,
Of the jobs that illegal immigrants perform or performed, how many of those jobs may disappear in an economic downturn? For example, if they employed were/are by landscapers, what happens if fewer people can afford to pay to have all their lawn/yard maintenance done for them? Or, in construction, if homewoners aren't doing as much remodeling? Won't some of those jobs disappear & would that not decrease the effect you mention? Is there any way of estimating how many of the jobs that illegal immigrants are presumed/assumed to be performing will disappear given X economic variables?
Export job growth is holding up fine - I see it everyday. It is above even my wildest expectations. [dryfly]
Could this be a bubble? With the rest of the world purportedly slowing down, will export growth crash also? What do we export these days?
I think every single one of these firms would be just fine (positive cash flow & maybe even show a paper profit) in spite of a recession IF they weren't so heavily leveraged.
Too late to undo that now... next exit: BKville
Could the workers pension fund work an angle like an ESOP in a prepackaged BK?
The unemployment number is artificially low right now.
Because all those teens and twenty somethings who used to be the first ones laid off aren't even employed at all.
And all of us women who used to be laid off because "we can't lay off the men they have families to support" aren't employed either.
And all those illegals who never even get officially counted have mostly all been laid off already.
And companies are keeping employees on, even though they don't have work for them. I have contractors calling constantly trying to find jobs they can do in between other jobs they have scheduled. Some of them are really desperate, cutting insane deals just to get work.
And my friend in L.A. who has been laid off 11 months wasn't even counted in the stats anymore. He just re-applied for unemployment for the extended benefits, hope he gets it.
This is much, much worse than you think, CR.
ratefink,
That itulip state by state analysis on post bubble unemployment is the bomb. Thanks for sharing that link.
donna: I think the female participation rate is not quite as low as you present it. While it is probably true that most engineers, technicians, and workers in "brawn" jobs are men (and of course not to forget most of upper-level management anywhere), most other occupations are either predominantly women or staffed at least at par - HR, administrative, legal, sales, marketing, nursing, teachers, retail, ...
As for any social or "family values" considerations in layoffs, I don't know where (or when?) you would have ever seen that. Maybe I'm too young and there indeed was such a time.
As for the unemployment rate, I don't know where the myth originates that it has anything to do with unemployment benefits.
The measurement is based on a survey of 50000 (60000?) households, the criterion being largely "have you actively looked for a job in the past 4 weeks".
Unemployment benefits come into the picture only as far as they may be asking people to submit evidence of searching a job, compelling them to keep up appearances even with low prospects, as long as the benefits last, which will be reflected in the survey, statistically speaking.
There are other unemployment indicators, e.g. "new claims" and "continuing claims" which are based on benefits, but that's not the "headline" unemployment rate. And given that benefits last about 6 months max in general, claims probably underestimates unemployment quite a bit.
CR, I was about to get on my usual soapbox about UNemployment (the U3 v U6 fraud(IMO))in the context of your charts on employment but I wanted to crosscheck and establish the relationship between the two so I looked for the source of your data - but all you footnote is YOURSELF !
C'mon..
-K
How can we have an economic collapse of the US and a Greater Depression with only 8% unemployment?
Come on, CR...8%?
8% is only a stepping stone down the hell hole.
But over all, total employment probably won't decline enough to cause unemployment to rise to 8%.
But I expect and hope it will rise enough to make sure that McCain won't be elected. That would be just fine with me.
for what it's worth, information tech jobs in the bay area do not seem to be so affected -- solely from my perspective as a hiring manager. I am trying to convert a contractor to work full-time, but he tells me that people are begging him to work. (I told him he should convert now because the recession will get worse. Machievellian AND true -- for the win!)
My friends who have started small companies are asking me for leads. We have attractive positions at my (fairly prominent) company that are not filling, or even getting many resumes.
So, the difference between now and 2000-2002 for tech jobs is extremely sharp. People were begging for work then, and resumes would flood any job offer.
CR,
If you read this, perhaps you can explain a few things.
Why do you pick 8% unemployment as the indicator of a 'severe' recession?
Are you doing a historical comparison?
Do you compare the 8% figure to the comparable historical number when you make your analysis?
To me it seems that first one must assume that this 8% number is a valid indicator of a 'severe' recession. I have my doubts on that, with the way the numbers are cooked, but if it is indeed valid, then I guess we just sit back and watch the numbers.
This site is quite nicely informed but keeps being reasonably optimistic. That's possibly a reason why I keep read both posts and comments here.
But isn't it now a tad too optimistic
Lots of folks in my neck of the woods are "underemployed", as in, they are listed as employed, but not making any money: realtors, mortgage brokers, roofers, restaurant owners and waitstaff, not to mention local owners of gas station/mini-marts (the money is in the snack junk, not the gas). Goobermint numbers are nothing but smoke and mirrors. People buying foreclosed homes at "a bargain" are wiping out somebodys elses equity/retirement in the neighborhood. The goobermints propping up of the stock market is absolutely criminal. Good time to be laying in supplies of basic neccessities. Things look to get real ugly down the pike.
Anonymous Coward (Bay Area Hiring Manager):
You can contact me at poppysha at gmail dot com . I know someone who is looking. Thanks.
RE Bear-- the birth-death adjustment is only used for preliminary estimates of nonfarm employment, which are based on a sample of employers. At the end of every year, the numbers are adjusted based on unemployment insurance tax reports from ALL employers. No adjustments are made to those numbers.
The methodology for measuring the headline unemployment rate has not changed since 1967. CM is correct that it is based on a monthly survey of 60,000 or so households (was 50,000 for a couple of years due to budget cuts).
You can find out how the gubbermint measures employment and unemployment at U.S. Bureau of Labor Statistics
I think unemployment will exceed 8%. There is a LOT of fat to cut in the retail/leisure hospitality sector (the starbucks layoffs are exhibit A). The entire city of Las Vegas is exhibit B.
Anonymous Coward: I think I can solve those two riddles for you:
(1) Contractors: There is increased demand for contractors, as opposed to employees. In some occupations there are virtually no advertised positions for employment, but the phone is ringing off the hook from body shops.
(2) Companies desperately seeking "talent" -- with N years of postgrad job history but N+5 equivalent or more years of "experience", and with the "hot skills" of the last less than N years. Another factor in this is that your "friends and associates" can yield only so much "talent" if you are not willing to advertise and deal with the deluge of resumes.
Anonymous Coward, looks like you are actually advertising, but research the following three things honestly:
(1) Are you looking for implausible combinations of skills and credentials? (Variation on the theme - is there a limited "static" labor pool from which you are recruiting?) You or your organization may be excluding, or repelling, many qualified candidates.
(2) Is your Staffing giving you all resumes, or are they "pre filtering" and screening out your good candidates? I have known of managers who frequently hired from Staffing's reject stack.
(3) Are you considering hiring from the unemployed? If not, you are merely poaching, and you have to offer something compelling enough to compensate for the risk of switching. An "industry standard" package may not do it.
And believe it or not, some "prominent" employers (or corporate divisions) have a bad name, for certain job descriptions. Of course I won't name them here.
No offense of course, I'm just laying out a few things without knowing your circumstances.
Anonymous Coward writes:
for what it's worth, information tech jobs in the bay area do not seem to be so affected -- solely from my perspective as a hiring manager. I am trying to convert a contractor to work full-time, but he tells me that people are begging him to work. (I told him he should convert now because the recession will get worse. Machievellian AND true -- for the win!)
Tell me honestly. I have Java, J2EE, program, project, product management skills etc. - sadly I think I'm worth $150K-$180K or $125/hr +expenses. I tell ya - when I tell this figure to the recruiters they run like hell - they quote 90K to 110K p/a to me. Well fuck you..
No worries - I earn money from "speculating" in the market.
Supply and demand no ?
-K
"Export job growth is holding up fine - I see it everyday"
Interesting paradox:
We ship jobs to other locations because of lower wages rates (mainly).
Now with the costs of distribution so far ahead, one wonders of the economics.
A taker moving from CH to the USA has now got a 3.3M additional cost of freight charges because of fuel...
Are we going to see a boomer-rang in jobs growth?
I tell ya - when I tell this figure to the recruiters they run like hell - they quote 90K to 110K p/a to me..
~110K is certainly the going rate for IIT grads. If you've got more productivity than them, feel free to sell yourself for that. Me, dunno . . .
...Anyone read that Harper's article a while back?...It questioned official Government #s....
I wonder what the real #s are.
Also, didn't I read somewhere that something like 50% of new jobs since 2000 were real estate related? (And you know that government wasn't far behind).
LOL, this will end well.
~110K is certainly the going rate for IIT grads. If you've got more productivity than them, feel free to sell yourself for that. Me, dunno . . .
Troy
Please source your data. Here is something from InformationWeek
For IT staffers, median base pay fell to $73,000, down from $74,000 the previous year. For managers, median base pay dropped to $96,000 from $97,000 last year. Median total compensation, including cash bonuses, also dipped a hair--down $2,000 to $76,000 for staff, and down $2,000 to $103,000 for managers. The survey includes more than 9,600 U.S. IT pros.
Info Tech Salaries Drop, Our Survey Finds. What's Holding U.S. Pay Down? -- InformationWeek Annual U.S. Salary Survey
And I as a manager was NOT paying $110K for entry level graduates in Denver - ok, I only hired people with 4+ years of experience and I paid $75K-$90K p.a. - for very specific Java, J2EE experience.
I do agree with you of course - since people didn't want to pay me $150K-$180K ( yup I was asked to take a pay cut ) then I was free to say f*ck you and utilize my talents fulltime in the financial "speculation" field - and so far, 18 months later its turned out quite ok ( I'm alert to the luck aspect cf Fooled By Randomness; we'll know stuff with more certainty 10 years down the road ).
But somehow, I think its a waste that my software skills are kinda just not utilised - To overstate the point, its like a highly trained, experienced urologist with 1000+ RRP's under
his/her belt turning his/her back on that life-saving skill and sits around watching CNBC all day cos he makes more money that way..
It IS a shame.
-K
The Harper's article (by Kevin Phillips) alleging twisted government statistics was laced with errors. I fact-checked what he said about the unemployment rate methodology being manipulated. He got a lot wrong.
sk: The question is, are the positions that you are rejecting filled with somebody else? Probably difficult to tell.
I know similar stories from hearsay, though more in the area of employment. There are cases where positions stay unfilled over long periods (clearly that requires that the position be advertised to begin with). That tells me that the work must be pretty discretionary and certainly not urgent. There is certainly a lot of lowballing going on. It's like in retail purchases where you can wait nearly forever until you get a bargain price when you don't really need the item or not immediately.
Likewise when positions are not even advertised and they are spending months on end to get elusive leads from internal "networking". No urgency.
With expected slumping aggregate demand or simply stagnant growth, we can expect even more categories of work and business products to become discretionary as people figure out if the did things a particular way the last 5 years, they can continue the next few years like that too.
Hi, 35 yrs exp doing 'Sr elec tech' work (Austin, TX) making $45K a year, mostly PWB layout. Job forecast is bleak, I've been out of work 2.5 months. Never seen things this bad, in the 2.5, 1 interview & 1 nibble. Yeah, no duh.
"Where are we going and what am I doing in this handbasket?"
cm- excellently stated viewpoint. I have no idea whether the positions are filled either.
Obviously I have a network - who wouldn't - but I don't embarrass them and they don't embarrass me by going thru a rigmarole {no, NOT rigmorale) - there seems to be an expectation - hmmmm describing the non-concrete conversation(s) is hard - there seems to be an expectation that compensation is a back-burner item, especially for salaried positions; the IT I knew all through the '80s and early '90s let me be pretty upfront about the money aspect ( but it also expressed how I would act in meeting my pre-agreed goals - MONEY matters! ) and the IT corporate world accommodated my style - now there's more sturm and drang on such stuff.
Which is OK - I'm busy practicing a new skill, that's very very different, very right brain versus the other left brain stuff.
But the BS about salaries in IT has to be confronted with real data - that I offered.
-K
The equation is easy.
Baby boomers looking to retire find their fund is down 20-30-50%.
House value is down 20-30-50%.
So no retirement.
Therefore no employment for younger folks.
Young folks are spenders. Less spending
Less service jobs, less manufacturing jobs, less taxes
Less taxes, less Govt jobs.
Less Govt jobs, the greater the possibility that someone will leak the real unemployment rate.
ThaT will then jump to 15%+
no bloody worries.
The US is headed for REAL social strife.
regards.
One thing I forgot to point out in my earlier post was that a lot of employment in the service industries are flexible, which means that a person who works a 5 day week can be asked to drop down to a 4 or 3 day week.
It's a way to keep people employed, but pay them less.
I suspect that this behaviour might result in lower than expected unemployment figures. Nevertheless, median income levels would drop drastically.
sk: When in the process compensation is discussed seems to depend on the participants. Some clarify the "range" first, then proceed only when it's not a deal breaker. At least it shows clearly what it's about. The problem is some people are somewhat "flexible" on pay, but insist to be fairly paid for the work (and how much of it) they are asked to do, which becomes difficult when the work is not even discussed.
As for references, many recruiters and hiring managers are professional enough to only check them when they are really ready to make an offer, and will ask for them only when things become serious enough. But I have heard otherwise too.
At the end of the day, with what degree of courtesy people treat each other probably depends on their respective perception of leverage and how fungible/disposable the other party is.
I heard that during dotcom times, candidates would not even show up for second or even first interviews, and/or would place ultimatums. Clearly that's no longer happening now. Back then it would have been unthinkable for most (tech) employers to keep candidates "in the fire" for weeks or months and asking them to run through gauntlets of up to 4 (!) interview rounds.
But, those days seem to be over for a good while.
Official unemploymen statistics contain only those age 25-55.
Douglass Carmichael, that is incorrect. The labor force includes anyone 16 and older who is employed or unemployed. Check it out at U.S. Bureau of Labor Statistics
ScottB: Where "unemployed" is defined essentially as "having made specific efforts to find a job within the last 4 weeks". Which includes e.g. contacting or talking to employers, but excludes just browsing job boards. And it's based on a survey of just 50000 or 60000 households where systematic bias excluding high-unemployment areas/populations has been alleged.
cm, agreed, that is the definition of unemployed--same definition since 1967. It does include networking (asking friends/contacts about available jobs). The basic question is, did you engage in some job-seeking activity. Otherwise, if jobless, one is classified as "not in the labor force", and is not part of the unemployment rate calculation.
As to systematic bias--not sure if you are talking about Kevin Phillips' allegation that the sample was trimmed during the mid-1990s to lower the sample in central cities. I posed that allegation to a BLS staffer, who replied "Any increase or reduction in the CPS sample would not have affected unemployment rates for any particular racial or demographic group." The sample was increased again a couple of years ago. The sample is random/stratified, and is based on the 2000 Census to fairly represent the 16+ population. There is some bias in the Census, I do not know if BLS adjusts for that or not.
In my opinion, BLS bends over backwards to be non-political, knowing that if they get tainted, they are effectively toast. Various charges have been made over the years, but I don't think any have held up. That doesn't mean their methodologies are perfect, just that there isn't an agenda behind them.
ScottB: I didn't mean that the bias was deliberate. And yes, the inner-cities thing was a specific point I heard of. What I don't know but speculate is that due to the survey methodology, certain groups at the "fringe" of society were unemployment is pretty high are underrepresented (drifters, live-in relatives, generally those without stable address and landline phone number).
I'm only marginally familiar with stochastics, but it seems to me that most of the theorems about sampling, extrapolation (modeling), and confidence hold only when the "universe" has certain uniformity and homegeneity properties.
I have my doubts that a survey of 60000 households can adequately capture a population of 300 million.
But my beef is mostly with the definition of unemployment. It is overly restrictive and does not adequately capture the effects of underemployment and the supposedly-declining quality of jobs (i.e. pay and benefits).
Recognizing that the US is not Germany, in Germany part-time workers working less than 15 hours per week and desiring more hours (by way of announcing their availability for full-time positions to the Dept. of Labor) are included in unemployment.
Then there are potentially insidious provisions about "being available for work". One lady claimed on some other blog that a family member of hers was taking night classes (to update his "skills" as we are supposed to do on our own, are we not), and was told by the DOL that he would only be considered to be available for work when he would drop the classes to take a night shift job. That was for the purpose of unemployment benefits, not the unemployment survey though.
That's one other part of the unemployment definition -- you have to seek a job, and be "available for work" on short notice and probably on an everyday basis.
cm-agree with you that the official stats will not pick up those on the "fringe". Not sure how many fall into that category, how many of those meet the official definition of unemployed, etc. And some of those are employed, as well. As Nietzsche put it, all numbers are lies, without which we cannot live.
As far as 60,000 being adequate, we can agree to disagree on that. Most surveys are only about 400 in size.
In terms of underemployment, BLS publishes six unemployment rates every month. The headlines pick up one of them ("U-3"). U-6 includes adjustments for discouraged workers and those working part-time who want a full-time job.
No single statistic will reflect all that is going on in the labor market, so I'm not sure it's fair to object to unemployment on those grounds. The rate can "improve" at times because last month's unemployed give up looking for work, for example. And, as you point out, the rate says nothing about wages and benefits. None of the usual stats pick up on employers passing on more health care costs to employees by increasing the monthly paycheck deduction, etc.
I'm not an expert on benefits, but if I were the person in your example, I would have filed an appeal, and in most states I bet I would have won.
ScottB: Underlying the unemployment statistics is the definition of the "labor force", where the employment/population ratio has been conspicuously shrinking. I think there is substantial "shadow unemployment" beyond U-6, with people evading "proper" unemployment by getting into disability, early "retirement", casual and informal arrangements like Ebay trading or under-the-table work (doing jobs that are not available legally), or just getting by on less for periods while accepting that "making an effort" is largely a waste of time and money. But as those phenomena are not officially acknowledged, much less measured and studied, we are left to speculate, and cannot make definitive conclusions beyond anecdotes that are easily swept aside.
cm--You raise an interesting issue. I went through these stats a couple of months ago, even got some unpublished data from BLS. If you look at the change in labor force participation from 1997 to 2007, it is mostly due to the aging of the population. There is a ten point drop off in participation at age 55 (80 percent for 50-54, 70 percent for 55-59), and another 20 point drop off at age 60.
If you start back to 1980 and before, there has been greater deterioration in participation among men. BLS does an annual survey, and started asking in 1980 people who weren't in the labor force in the past year the reason for not working/seeking work. Almost all of the change has been in "disability". Don't know exactly what that means (diabetes? Vietnam/war-related? depression?). They could have named any number of other reasons (don't know if it's an open-ended question or multiple choice with "other"). Little change in 'because the economy is crap'. I'd love to see a research project around this.
ScottB: It probably means that there has been increased recognition, diagnosis, and accommodation of various disabilities relative to before, and quite possibly an increase in actual or new disabilities related to increased longevity, more sedentary work, and more work pressures/stress from more volatile labor and life circumstances.
It's probably also related to increased "discovery", diagnosis, and general "awareness" of ever more health issues and illnesses. Not necessarily causally, but certainly coincidentally.
Vietnam, I'm not so sure. People have served in WW2, but as opposed to Vietnam veterans, returned to a booming economy and the GI bill.