Solving Unemployment by Discouraging Workers

by Sal on February 3, 2010

in Economy,Politics

Jim Geraghty has an amusing video on how Obama is making the unemployment numbers go down – by turning unemployed workers into discouraged workers.

Geraghty talks about the discouraged workers as not being counted by the unemployed, but misses the other classifications of workers, including those who are open to work but not looking (marginally attached workers) and those who are working part time because they can’t find a full-time job.  The department of Labor divides the unemployment rate into six classifications:

  • U1:  People unemployed 15 weeks or longer
  • U2:  People who recently lost a job
  • U3:  Total unemployed (but still looking)
  • U4:  Total unemployed + discouraged workers
  • U5:  Total unemployed + marginally attached workers (which includes discouraged workers)
  • U6:  Total unemployed + marginally attached workers + workers in temp jobs who want full time work

Let’s compare the December, 2008 unemployment figures vs. the December, 2009 unemployment figures for each category:

ClassificationDec. 2008Dec. 2009

As you can see, in December, 2008, the situation was bad, but not nearly as bad as it is today.  Using the U3 metric, which is the standard method of unemployment, the unemployment rate has increased by 2.9%.  If you add in the other characteristics of U6 unemployment, you get an increase of 3.8%, almost a % point higher than the 2.9% increase.  This shows that the deteriorating unemployment situation is worse than originally thought.  The new numbers come out Friday.  Watch both the U3 and U6 numbers.  It is possible that the U3 number could decrease while U6 number increases.  The media will herald the decrease in U3 unemployment, but the real situation will be worse.  We shall see what Friday brings.

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