Even though "unemployment" statistics are reported as around the 8% range, real unemployment is significantly higher. The difference between the two rates are those who have stopped looking for work and those who are working only part-time. This is a healthy amount of people, some 22.8 million. We call these the "under-employed."
When so many people are under-employed, those people do not have money to spend on the extras that drive the economy. 70% of the economy is consumer spending and when a huge chunk of Americans are unable to spend beyond the basics, this has got to hurt the economy badly. No wonder that it has not really recovered.
Jobs are the answer however, we see nothing coming in the future that will change the dire straits that we are now seeing. This economy will not recover until a sizable piece of these 22.8 million again are working full time and can once again start spending on things that are not basics.
One thing this recession has shown many bosses is that they do not need as many employees as they had prior to 2008. We were speaking to a shop owner who used to employ 8 CNC grinder operators. They are now putting out as much work with 6 employees. Their profits are up and they will not be rehiring those other two operators again. We do not believe their experience is out of the ordinary.
Additionally, many jobs have gone overseas and most of those will not come back to these shores. So where are we going to get the jobs to help these 22.8 million? We hope that you do not say "the government should hire them" because that would be the wrong answer. We suspect there should be some meaningful job incentive offered such as a tax credit which would significantly cut the expense of adding a new employee. We need to encourage employment but it has to be more than a short-term incentive. We would suggest it be tied to real unemployment and not the government massaged unemployment numbers we hear the Administration touting.
Conservative Tom
P.S. We have previously written about the "numbers" which the Bureau of Labor Statistics reports. We believe they are being massaged to send a better message for the Administration. Certain "adjustments" can be taken to make things look better and most of the public will miss the detail and only focus on the reported numbers. We have a fun bet with one of our loyal readers which is that the "reported" unemployment numbers will be in the 5-6% range by the first of November. We will see. What is your opinion?
‘Real’ Unemployment Rate Remains at 14.5 Percent
A protester in Muskegon, Michigan last December. (Greg Lindstrom/The Muskegon Chronicle/AP Photo)
(CNSNews.com) – The “real” unemployment rate – a broader, more inclusive measure of the country’s jobless picture than the one usually used – remained unchanged at 14.5 percent in April, as the economy created a paltry 115,000 jobs.
Known formally as the U-6 unemployment rate, this measure includes those formally counted as unemployed, those known to be marginally attached to the workforce, and those who are working part-time because they cannot find full-time work.
According to the Bureau of Labor Statistics (BLS), the U-6 unemployment rate remained flat in April at 14.5 percent – meaning some 22.8 million people are either unemployed, have stopped looking for work, or need full-time work but can only find part-time employment.
The U-6 rate is considered to be a more accurate measure of the unemployment picture because it includes a broader sample of those affected by poor economic conditions. By including both unemployed persons and those marginally attached, this measure captures people the BLS would normally count as out of the workforce.
Being marginally attached to the workforce means that a person is not employed and has not looked for a job in the past month – but would accept a job if any were available. The measure best captures people who are available to work but who have given up looking for a job.
The government does not count these people as officially unemployed because they have not looked for work in the past month. They are usually deemed not to be in the labor force at all, and essentially disappear from the government’s survey of unemployment.
By counting people who can only find part-time work and including it in a measure of unemployment BLS is able to track what is known as underemployment – when someone is forced to work part-time because full-time work is unavailable.
This measure provides a deeper look into the relative weakness of the jobs market than that provided by the official unemployment rate because while these people are employed, they are not as productive as they could – and would like to – be.
The BLS had better get busy. I thought our "fun" bet was for $20. No?
ReplyDelete--David
Actually, the U-6 unemployment rate peaked in 2010 and has been declining significantly faster than the official rate. This is also an area where employer-based health insurance is a problem. Part-time workers are not normally eligible for such benefits as health insurance, disability insurance, or health care through the employer. Ergo, the employer benefits financially by hiring two part-timers instead of one full-timer. This is easy to do with so many people -- even capable, educated people -- unemployed and taking whatever work they can find, including part-time. They guy should have made this point.
ReplyDelete--David
David, the rate is coming down and is now just over 8%. It only has to fall another 2% in the next six months. Very easy.
ReplyDeleteYes our bet is $20--better start working on raising those dollars!
I wasn't a math major, but it has come down about 0.1% per month in 2012, and Europe is looking shaky again after the elections in France and Greece. It will be interesting to see what happens to the French economy in the next couple years if their new president reverses course on the austerity program. Will it be a test case for the U.S.? Maybe you can post something on that topic.
ReplyDelete--David