The Real Labor Market Story

The economy shed almost 600,000 jobs last month, and the unemployment rate rose to 7.6%. This number is bad, but when one digs deeper the numbers become much worse. 

First, it is really difficult to find a job if you are unemployed. A 20 week average to find a job is unreal, and is the reason extending unemployment benefits will be effective stimulus (folks will spend every time to feed their family, stay in their house, and drive to interviews - a lot of interviews it looks like). 

The next two numbers are the numbers that really scare me - because that first one was real hopeful for the unemployed and the recently graduated. 

After today's unemployment number the Civilian Employment Ratio is now about 60 percent. Lets be clear about what that number is though. It is the percentage of the population that is employed over the age of 16. (If one discludes students, seniors, and discouraged workers that number rises to about 65 percent Link).  Since about 1990, when the steady state for women in the workforce was reached, we have not fallen much under 62 percent. That 60 percent number is important because we nearly got to 65 percent during the great Bubble Boom of the 1990s. 

The hope that I have is that this Stimulus and many of the long-term growth plans that are on the agenda will set off another great high of Employment and Labor Force Participation. I could be wrong, but it seems to me that with adequate incentives, transportation, education, and eqaulity of opportunity that we could get up near 68 or 69 percent (that is an opinion not a data driven fact). That can only happen if this decline does not become too deep, and if we have another 15 or 20 year period with high growth and no crisises. 

The number that is the most startling is the U-6 unemployment rate which is at an atonishing 13.9 percent. I think this is the part of the debate that goes unnoticed in Washington, that things were pretty damn bad before the recession and financial crisis. As Paul Krugman often says the good years were not that good. 

That number and this analysis were providing by Sudeep Reddy and the good folks over at WSJ Real Time Economics Blog

"The 13.9% unemployment rate — known as the “U-6″ for its Bureau of Labor Statistics classification — includes everyone in the official unemployment rate plus “marginally attached workers,” who are neither working nor looking for work but say they want a job and have looked for work recently, and people who are employed part-time for economic reasons — they want and are available for full-time work but took a part-time schedule because that’s all they could get."

There are a number of data points within labor statistics that I am sure could be inaccurate because of varous measures and behaviors that go uncorrected, but this U-6 number seems to get at some of this problem. If I were President Obama, I would start using the U-6 number in public because many of the folks measured in the U-6 will not show up in the improved unemployment numbers - when that day arrives (such as people moving from part-time back to full-time).