What happened to unemployment in 2008?

Politics and religion
41

If you used to make 80k in 2008 and now make less than 10 dollars an hour working two jobs, you’re not counted as unemployed but you are very like underemployed.

If you lost your job in 2008, lost your house in 2009, and became homeless in 2010 and basically stopped looking for work, you’re not counted as unemployed because you only count people who are looking for employment, which excludes basically anyone who just gave up.

Usually unemployment rates are seasonally adjusted so you don’t think that suddenly everyone is employed in November and December just because they have temporary employment for the holidays. Same with agriculture.

There’s some debate about people in part-time work because it’s not easy to measure those who choose to be in part-time work because they don’t want to work full-time vs. those who want part-time but can’t find full-time employment as well.

Then you have the expected lay-off group, this group may not be actively looking for employment but they’re in an industry, like logging, that’s expected to have lay-offs for a short period of time and will be recalled. There are rules actually build around these kind of positions when it comes to drawing unemployment too, so they can do that but not be expected to actually leave their industry.

Democrat or Republican, there i a strong argument to be made that the current unemployment rate is under-stated, but it would have been under-stated for a long time, to the point where it would be a poor argument to say xyz group, president, whatever, made it worse.

Unemployment also doesn’t count the prison and jail population. That might seem… silly but with that population growing the way it is and how certain groups circulate in and out of it… that might be worth looking at. I doubt the Republican party would be especially interested in this group though when they reference these other stats.

42

The most commonly used form, the one that shows 4.8%, is people who are currently out of work, but have been engaged in the work force over the last year. This excludes people who are not part of the workforce due to either choice or force. So you do not see retirees, stay at home parents, people on disability, and others who are not working or looking for work.

There is a certain level of unemployment that is inevitable. At any point there is a certain percentage of people who leave their jobs, no matter how good the economy. 0% unemployment is actually impossible, there is always a certain amount of slack to allow for fluctuations, seasonal work, and people moving around jobs. This basically is workforce lubricant. By having a certain amount of people looking for work it makes it possible for companies to fill positions. This structural unemployment is where the ‘target’ is set. At this target level, in theory, anyone who is looking for work should be able to find some. it may not be in their field, it may not be for their desired pay, but there should be work available.

However there is another unemployment stat that is used, the unemployed and underemployed. This includes people who are discouraged from looking (due to lack of success), people who want full time but only work part time, and people being paid below their market value. This number is higher than the straight unemployed, for obvious reasons.

The common line of Republican attack on Obama, via the economy, is that this second value is more important and one we should be focused on, that somehow it invalidates the unemployment numbers.

Here’s a chart showing them separated, and that same data combined:

Basically they track together. The U-6 number is roughly double the official unemployment number.

The problem is that this number still has improved greatly since peak recession.

But the reason this attack is used is because the official unemployment numbers are actually pretty damn good lately. also, by switching the measurement reference, it can confuse some people. Someone who understands how these different stats are tracked can understand how u-6 differs from the official jobs report numbers, and how that has shifted over time. But to your typical American? They may not be economically sophisticated enough to discern these different stats, and may, when hearing unemployment peaked around 9-10%, but todays u-6 number is close to that level, may mistakenly interpret that to mean things have not improved. It is nothing more than deliberate obfuscation and confusion.

The other thing they throw out is the number of people who have left the workforce completely. And it is a big number! But a big part of that, which is not to be repeated, is how a) this was predicted years ago due to demographic changes and b) people leave the work force for many reasons, and growing wages for the primary earner can also cause a spouse to leave the workforce, indicating wage growth and c) that people who would otherwise have retired, but had to work to recover savings, are now able to do so. Now mostly it is because Baby Boomers have aged into retirement that the workforce participation rate has dropped.

Basically most ways that the Republicans are trying to say the economy is bad are either deliberate obfuscations, or outright deceptions, for political reasons. This is not to say that there aren’t economic problems. But on a macro scale the US economy is doing fairly well, and has by almost any measure recovered from 2008. Unemployment is a bit higher than prior, and wages have contracted in real terms, but those are improving. Plus over time the structural unemployment target has gradually shifted upwards due to changes in technology and the workforce.

43

The big unemployment stats are U-3 and U-6

U-3 is the unemployment rate as calculated by the government

U-6 is real unemployment and includes discouraged workers (gov’t defines anyone out longer than 6 mos as discouraged) as well as those claiming underemployment.

Usually U-6 recovery lags behind U-3.

44

You’re obviously a Democrat apologist because look:

Why are you afraid of the facts, CraigM???

-Tom, doing an impression of a Republican, but failing because I couldn’t think of a more appropriate word for “apologist” (that shadowsite stuff is pure comedy gold; it reminds me of the crazyinsane labels on this peppermint liquid soap where the crazy person who made it just went all stream-of-consciousness and crammed it onto the label in fine print)

45

I’m not sure that clearly defining your terms and then tracking the data according those terms counts as “under-stating”. But, yeah, if you change the government’s definition of unemployment, the unemployment rate is under-stated. Or over-stated, depending on how you change the definition.

-Tom

46

True. It really would be a change in definition, and no one wants to be in charge when unemployment “magically” shifts from 4-5% to something like 12% in a good year. No matter how many asterisks you put around that number, the bulk of the population isn’t going to really follow that change well… but I think when you ask an average person who they think is included in the unemployment rate, I think it’s going to be different than the most reported number we use today. My guess is most see people who give up looking because they’re so discouraged as a group we should count, for example.

47

To be fair, U-6 is close to where it was during the peak of the Bush-era bubble before the bottom fell out (9.6 compared to 9.1)

Another thing to note: economic policy changes don’t change things overnight. Often it takes up to a year for it to have impact.

48

While I am on the ‘the economy has recovered a ton’ side of things, there are a few things that the crazies could be right about.

The seasonal adjustment stuff is obviously just an estimate and there have been issues with the adjustment. It is most likely honest attempts to get it right, but it is very easy to imagine that a thumb is being put on the scale. Here’s a very recent example of a problem found (and reported) by the government with the adjustment having been too positive:

Another thing that people point to is that they announce unemployment in the jobs report but then they revise previous numbers. This makes sense of course because these are just estimates and after the fact they get more data. There have been some cycles where announcing better numbers as the big headline while adjusting the previous numbers down has been a trend. It is possible that this could be manipulation to increase consumer confidence or other factors.

I think most of this is just noise, but there’s some room for reasonable discussion. 22% unemployment is not in that realm.

The economy is to some extent rigged and arguably more than normal now. The interest rate (or lack thereof) discourages savings and encourages stock investments. No surprise that the stock markets are at such highs. It increases home prices.

The big banks have all been hit for clearly and blatantly manipulating Libor rate which is a huge thing.

49

That does happen, but more often lately employment numbers have been getting revised up, occasionally significantly.

The low to non existent interest rate is one of those highly complex things that has massive secondary consequences, that the average person has no clue about. In general interest rates this low seem to mostly benefit the wealthy, and the running series of excuses to not raise them at the Fed is getting old. For the last year and a half or so we’ve perpetually been on the cusp of them raising interest rates, always 3 months out, but inevitably the next Fed meeting they kick the can.

China is crashing.
Brexit.
Greek Crisis.

Right now they project interest rising in the next 3 months, but I’ve no doubt they’ll push. Probably something something uncertainty from the election.

As for Libor? My god I wish we could throw those banks in jail for that. If we’re going to treat companies like people, we should punish them as such too. That was some shadowy cabal conspiracy type shit they pulled. Literal back room screw over the public type malfeasance, and they literally got caught doing it.

The CEO’s of every bank part of that should be in jail today. Not just them, but every senior exec. Not hyperbole either, I literally do think they should be in jail.

50

Raising interest rates reduces demand, which puts downward pressure on employment. I don’t think that’s a good thing for the common person. The Fed has continually delayed the introduction of higher rates because the expected increase in inflation that would force them to raise rates keeps failing to arrive. Prematurely raising rates is counterproductive, as the EU central bank and Swedish central bank found out. They tipped their economies back into recession and were subsequently forced to lower their rates even further.

51

I don’t disagree, but at the same time the near zero Fed rate is making non stock savings (which is where most working class people have their savings) relatively unhelpful.

It is an enormously complex thing. For sure higher rates do reduce demand for capital, which can, in theory, reduce job growth. But at our current sub 1% prime rate the monetary policy has basically one way to go. And while reduced capital demand could have a slowing effect on job growth there is a stronger connection to loose monetary policy bolstering the stock market and real estate prices. This predominantly benefits those who have access to Fed money, i.e. banks, big corporations, and already wealthy individuals.

That lower interest rates push away from savings and into stocks just means that it is prioritizing wealth growth at the top over the working class, most of whom hold no such investments.

And in reality I can’t claim to know what the Fed rate should be. I’m working at the edge of my understanding on this issue, and that’s true of most people who aren’t in the financial markets. My father in law worked the exchanges for years, so I do have that insight, but I doubt even he fully understands the decision process for someone like Yellin.

52

I agree it’s really complex, and we seem to be in a weird situation where investment and inflation seem way lower than they should be. It’s hard to believe that there aren’t more worthwhile investments with technology how it is, and interest rates as low as they are. So I can’t claim to know where the rates should be.

That said, I think the argument that we need to boost interest rates to help working class people with their savings accounts is misleading. First, if they boost rates without inflation and that ends up bringing a recession, then rates are going to be lower longer than they would be otherwise.

Second, working class people don’t tend to have much in the way of savings anyway. What they need is a tight labor market where more people are considered employable and people who are already employed are getting raises (and/or some kind of redistribution). It may be strange days, but I haven’t seen a good argument that raising rates is going to lead to more demand for labor, and the vast majority of expert opinion seems to say that raising rates would lower demand and make the situation worse.

53

In one sense it’s extremely simple*. Inflation is below target and projected to be below target for the next few years. So, at a minimum, interest rates shouldn’t be raised.

  • It is in practice complicated by among other things a) the dual mandate of the Fed, in contrast to, say, the ECB, b) the availability of unconventional measures like QE, and c) the actions of other central banks. But in this instance neither of those point to an increase in rates.
54

All valid points. Like I said I don’t have the answer here really. I just look at this perpetual cycle of always being on the cusp of raising rates, but never actually doing so, the fact low interest rates over the long term could lead to another real estate bubble, that banks are already itching to roll back every measure intended to prevent another 2008 style collapse, and the low inflation as things that could be problems in the future.

Every time the Fed declares that it intends to delay a rate change we see the markets react. Experts opine about how not raising rates indicates some ‘lack of confidence’ etc.

It’s a nested problem. I just look at the trends and see this time as an anomaly, one where conventional policies seem to be out the window. So, yes, raising the Fed rate may not be the answer today, but when? Rates can’t stay this low forever, so what are the conditions they wait for?

55

I sometimes wonder if we’ll ever get back to employment levels (and the associated increase in wages that go along with that) that we used to consider the target. There’s been terrific strides in productivity and efficiency due to technology and automation over the last 30 years that allows businesses to do a lot more with a lot fewer people. I only see that trend continuing, as we’ll likely be seeing self-driving automobiles in the future. Say that decimates the taxi and trucking industries, then that’s yet another group of laborers that must somehow fit into the workforce.

The increase in productivity isn’t making the country any poorer, far from it, but at the risk of sounding Marxist, that wealth is being concentrated in the people that own the means of production, the working class is losing out. Which is understandable how that is happening, but I think in the future we are going to need a make a shift in terms of culture and economic philosophy in what work means.

Right now in America, your job defines you. When meeting someone new, it’s usually one of the very first things people inquire about. If you’re not working a 40 hour work week, it’s looked down upon. But if increases in technology and automation make it so there’s just not enough jobs around, but we continue to generate more wealth, we’re going to need to change how we address these things. Whether that’s a basic income or something else I don’t know, but I do feel like it is going to result in cultural upheaval. The few that control the wealth have historically not been fond to relinquish it, unless faced with civic unrest and revolt. I’m not too worried about myself, but I do worry about a generation or two down the line.

Sorry for the tangent. :)

56

Let’s just end this idea right now. All of the “U” measures are calculated by the government. One is the “official” unemployment number, but let’s not pretend that there is some “real” unemployment number that the government doesn’t calculate. U6 comes from the government.

http://www.bls.gov/news.release/empsit.t15.htm

You can go over to FRED which is an amazing source of economic data, and see all of the household survey series they have available here: Current Population Survey (Household Survey) | FRED | St. Louis Fed For instance, they have 817 data series on unemployment rates.

and plot a graph like this:

There’s the U3 rate on the top of the key, followed by U1-U6 (minus U3). The lines from bottom to top should be U1-U6 or close to it. They haven’t always collected all of these rates, so some start in the middle.

57

It seems very relevant to me. It seems like the economy isn’t quite behaving quite like you’d expect from post-WWII experience, and it’s very plausible that this is down to the different ways that technology is evolving. The prospect of self-driving cars putting millions of truckers and taxi drivers out of work can’t be that much of a tangent for a thread about unemployment.

58

Ooh, Dr. Bronner’s soap. Crazy text, but the soap is quite good, I’ve used it for years.

59

To oversimplify things again, higher inflation expectations and other indicators of impending inflation, eg real wage increases. Until they get those, they really can’t justify raising rates. And you could argue that they’ve been much more hawkish than other central banks in terms of indicating willingness to raise rates (on the other hand they were extremely dovish on the way down). Most other major central banks have been saying they’ll hold rates at or below current rates and maintain their QE for years into the future. It’s just that every time the Fed has been, as you say, on the cusp of raising rates, there’s been some external shock that’s lowered inflation expectations. If you’ve got a mandate for price stability, you can’t ignore that.

None of this is to say low rates haven’t created asset bubbles. They clearly have. Not just in real estate.

60

Oh, and as for the “Great Recession” being just another recession, here is real GDP as a % change from year to year, seasonally adjusted:
https://fred.stlouisfed.org/graph/?g=6uwc

Unemployment is a lagging indicator, as was stated upthread.

Edit: Oh, and those light grey vertical bars across the graph? Helpfully the Fed adds recessions to their time series, so you can see how real GDP changed with all the other recessions as far back as this data series goes.

Edit 2: One of my favorite uses of FRED data is plotting inflation adjusted gasoline prices vs crude oil prices to show people that the refining companies aren’t gouging us every time the price of gas increases. EXXON IS STEALING OUR LIVES, MAN! https://fred.stlouisfed.org/graph/?g=6uwD