This article talks about how the national unemployment rate fell to 4.9% in October but relying on that one headline number alone as an indicator of the economy's direction ignores important information just below the surface. Economists look past the official unemployment rate at a figure called the U-6 rate. This gives a broader definition of what unemployment means. In October, that figure fell 0.2 of a point, to 9.5%. This rate is defined as all unemployed plus "persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of a labor force." So this is basically the unemployed, the underemployed and the discouraged, to sum it up.
While the unemployment rate has returned to the prerecession levels in the past few months, the U-6 remains stubbornly above prerecession levels even though it has seen significant gains in the past few years. The labor force participation rate has also been an area of concern and it fell slightly in October to 62.8%. The average hourly wages, however, rose 10 cents to $25.92 and average weekly wages were up as well.
http://www.cnbc.com/2016/11/04/us-unemployment-rate-is-near-5-percent-but-a-more-realistic-rate-is-higher.html
Another aspect to note is that of the jobs being created most are low wage, service and/or part-time job; however more importantly the backward economic policies and over-regulation of this administration.
ReplyDelete4.9% is more attractive than 9.5% so i can understand why they would rather use U-3 than U-6. You should not that There are other unemployment rates which are not recognized by the public but have an effect on unemployment all the same.
ReplyDeleteThis article points out the fact that the labor for participation rate has been consistently declining since the recession of 2008. It would be interesting to be able to distinguish how much of the decline in the participation rate is due to either the aging baby boomers or discouraged workers.
ReplyDeleteThis is primarily because as times get more difficult, increasingly people give up looking for jobs. When the good times are rolling and jobs are plentiful it is easy to get a job so even the causal applicant will have a job. But this leads us back to the question… Why do we have a U-3 number at all? Aren’t all U-6 people unemployed? But during bad times like the recent few years it is scary to hear the Unemployment rate is 18% (U-6) but less scary if the number you hear is “only” 10.6% (U-3) so the government prefers the U-3 number and unfortunately the news media plays along and uses the U-3 number because it is the “Official” unemployment rate.
ReplyDeleteThis article is really interesting since it shows why the U-6 is a true measure for calculating the unemployment rate in an economy rather than the official unemployment rate because it takes into consideration discouraged workers, part time workers, and workers marginally attached to the labor force. Therefore, the official unemployment rate of 4.9% is not a true measure of unemployment in the economy.
ReplyDeleteAlso, an increase in wages by 10 cents is not a positive sign in the market for labor since employers are competing against each other to attract qualified job candidates.