If they really want something to question it should be how inflation is calculated. Almost everything is going up in price and it doesn't seem to reflect in the inflation. How it's calculated really needs to be revisited and modernized.
That's a cost of living index. Switching from COGI to COLI would be fraught with political nooses for a politician to hang themself with. If the switch were to happen poor people might take more notice of how badly they're being taken advantage of by the Company Store known as the stock market when they can point to the cost of living index and ask why the COLI went up 30% and they got a 0.5% raise.
>If they really want something to question it should be how inflation is calculated. Almost everything is going up in price and it doesn't seem to reflect in the inflation.
Or maybe there's section bias going on? ie. everything you're worried about is going up in price.
There is unquestionably a huge amount of inflation in the things the upper classes spent money on - real estate, investments, etc. This seems to me to be indicative of a lot of upper class people benefitting from the upward redistribution of wealth that has been ongoing for the last 25 years.
The impression I get is that it's not things going up in price, but that sales are much less common. For the person who watches for sales this matters, but the inflation rate isn't calculated that way.
a) It's not journalists questioning these numbers, it's politicians and economists, and b) the criticism is long-standing and entirely accurate. Folks have been criticising this statistic for many years, and COVID has only made those criticisms more salient.
The top-line unemployment numbers factor out a large number of cohorts. For example, the number of people who've permanently stopped looking for work aren't counted.
COVID has inflated numbers in those cohorts and the top-line figure is likely understating these effects as a consequence.
Unfortunately, you've opted for a pithy dismissal based on, frankly, a cliche about mass media that offers no value or insight.
Your comment doesn't reflect reality at all. For the years prior to the 2016 elections, the economic news was loaded with optimism and high-fives - while the majority of US counties were stocked with people who regularly went without food.
It's not that there was zero improvement; it's that the pace of recovery in most of the US was a small fraction (often near zero) of what it was in the wealthy regions.
This has always been the case, though. The top-line unemployment rate does not, and has not ever included people who aren't looking for work. So why is Jay Powell just now losing faith in it? Why was it ok to make economic policy based on this narrow definition before?
Could it be because "not looking for work" was the result of more "natural" forces (disability, old age, etc) in years past?
> Could it be because "not looking for work" was the result of more "natural" forces (disability, old age, etc) in years past?
This is my guess.
My interpretation is that the concern is that COVID is leading to more discouraged workers than would be expected under normal circumstances, and so the top-line unemployment numbers are now understating or failing to reflect a critical impact of the pandemic.
Unsaid is that discouragement is the natural reaction to the bulk adoption of screening systems that filter out all but the most milquetoasty applicants - rendering (a rising number of) Americans increasingly unemployable.
First Time Job Applicants are one new filth class.
It’s important because the Fed is interested in the NAIRU - non-accelerating-inflation rate of employment.
Below a certain level of unemployment, the NAIRU models expect wage inflation (companies offering higher and higher wages to get new employees in a tight labor market) which drives inflation in the broader economy. This model kind of assumes that the labor force is inelastic. In reality if unemployment were low, a lot of “unemployable” or underemployed people would probably start looking for jobs, which makes it so current unemployment rates don’t accurately reflect how close we are to NAIRU.
If I understand this correctly, we are long overdue for this change, since it was reported way back in October 2019 [0] that wages, despite low unemployment, hadn't increased.
I suspect that politicians have been hesitant to poke the bear on unemployment numbers since the top-line has been so low that they could claim victory, but we are now reaching a point where the signals are so far divorced from the reality that they have no choice but to integrate something else to bring it more in line.
Criticism of the mainline “U-3” unemployment rate has been long-standing and widespread, though not by the incumbent party or central bankers generally. As the Financial Times piece notes, this change has “big policy implications”, an extreme understatement. The criticism comes from both the present administration and the quasi-independent Federal Reserve.
Note that unemployment in the US is measured by the Department of Labour, not the Federal Reserve, and likewise for the Fed’s other policy target, inflation — don’t measure what you regulate being the guiding principle. There are actually six measures of unemployment tracked by DoL’s Bureau of Labour Statistics, creatively named U-1, U-2, U-3, U-4, U-5, and U-6, described in Table A-15. Alternative measures of labor underutilization. Most critical and significant to this story is the determination of just who is, or is not, included in the definition of the denominator “US Labour Force”, which is now considered far too exclusionary a measure. As the article notes:
The fear is that a significant number of people will never return — and will be part of along-term economic scarring left by the pandemic.
Before the pandemic the weekly initial jobless claims had a maximum around 650,000. We’ve had around 50 consecutive weeks where this number has been well above 700,000. The stock market is at an all time high. We had an attempted coup in January and have seen government mismanagement to an extreme level in Texas recently.
An attempted coup? You have to be joking. I think you are reading a little too much Vox.
I am really curious what you mean about Texas mismanagement? If you are talking about energy, that has been in place for a very long time. If you are talking about revoking COVID mandates, the majority of Texans are for it.
If you would like to talk about mismanagement, we should really be more focused on California and New York.
A group of people were sent by the outgoing President to disrupt the process of counting electoral college votes and change the outcome of free and fair election. In other words, a coup. While it was a poorly attempted coup, it still was a coup.
I think there’s a lot of jobs that will never come back. While visiting HQ in Washington, I noticed most of the little cafes and convenience stores around the area were closed or only open for lunch. We’re at 60% working from home, and management is considering how to push that to 90%. If companies like mine, a large SAS monolith, move their people out of the offices and buildings, who will shop and dine at those small places? I worry they may not recover.
Real-estate interests, including banks for whom mortgage securities are a massive asset class, are a key factor in the anti-work-from-home constituency. And the major Fed constituency.
Oh freaking finally. I've been making the point for years that OUR is about 20% of total (all 16-64 minus ft+pt 16-14) unemployment.
I understand that the total includes self-employed but it also includes underemployed.
I am convinced that the most important employment numbers are:
People who are insufficiently (less income than needed to sustain until death) employed. I believe that number is much higher than even total unemployed.
People who are critically (less income than needed for regular bills plus typical emergencies) un/under-employed.
Compared to the reality of Americans, OUR is full-on bullcrap.
To your point, employment is an archaic, broken metric (from the "before times", when stable jobs throughout the economy were a thing). Jobs are poor indicators compared to a metric more robust and blended, such as income, needs being met or not by income, etc.
"Does your current income situation allow you to comfortably meet your basic needs?" "If not, how much is your monthly shortfall?" would be better questions to gauge consumer financial health versus "Do you have a job?" I assume this would not paint a pretty picture of the American labor market.
Even among those who can meet their needs, underemployment is still a serious issue. There are lots of people over-qualified for the jobs they have (the stereotypical barista with a masters) who could be producing more value elsewhere, and plenty of people working non-standard hours which skew the metrics (lots of people working excessive hours that really should be counted as 2 jobs, and lots of people who would normally be full-time being kept part-time to avoid paying benefits). The number of people with employment that adequately utilizes their skills without burning them out has dwindled substantially in recent years, and while the cost of lost economic opportunity and increased fatigue is difficult to quantify, it is certainly substantial.
I would consider underemployment to be a case where people are not making enough to live - food, health, shelter and clothes. Whether the area of work and their education qualification are a match, seems superfluous and an unwanted distraction from calculating labor participation and effective unemployment rate.
Well how much people need to live is highly variable and not very informative. If you get diagnosed with cancer and your medical expenses go through the roof but you're still making the same income, have you become underemployed? No, there isn't a problem with the job market here, there is a problem with healthcare costs.
On the other hand if you were making $200k last year and now you can't find a job that'll pay you more than $100k, you'll still be able to afford the necessities of life as well as quite a few luxuries, but that's still an immense reduction in economic output which suggests deep issues with the job market.
Underemployment is a measure of labor utilization. What you're describing is poverty, which is related but not equivalent.
It's about time this sees some daylight. I've been explaining this to people for years. I'm really not sure why it's been kept this way for so long and why the media never comments on how it works when reporting these statistics.
The economy has not reacted to the unemployment rate as it should since the housing crash. I don't know what all is broken but *part* of it I think is the gig economy--you aren't unemployed if you scrape up a bit of money that way.
Well, the unemployment rate is inherently a BS, deceptive metric. True Labor Force Participation Rate (LFPR) is a much better one because of who the UR conveniently excludes.
I seriously doubt many policymakers except progressives have "lost faith" in UR because it can be selectively-sculpted to make the economy seem amazing.
> the UR can be selectively-sculpted to make the economy seem amazing.
Beginning a few years after 2008, came endless news reports of our recovering and robust economy. That was hard to reconcile during times mine/other families were eating nothing but rice (except when we couldn't afford rice).
Huzzah for only reporting from US's wealthiest regions.
> Beginning a few years after 2008, came endless news reports of our recovering and robust economy.
Just like the recovery after the 2001 recession, that was hollow as shown by income distributional statistics: yes, there was an aggregate boom in both cases, and in both cases the gains were very concentrated at the top.
Unemployment/employment measures are about whether people have work, not whether they have money.
> True Labor Force Participation Rate (LFPR) is a much better one
No, it's not, among many other reasons since treating LFPR as if it was unemployment treats, say, a demographic boom reaching retirement age as if it were a mass unemployment event.
Or a long term trend of increasing average years of education as, ceteris paribus, a long term trend of increasing unemployment.
Or a long-term trend of increasing incarceration and forced labor as, ceteris paribus, a long-term trend of increasing unemployment (it's a problem trend, but it's a completely different problem than unemployment.)
And, worst of all, LFPR completely ignores actual unemployment. If no one was employed and everyone was actively looking for work, you would have 100% LFPR even though you had 100% unemployment.
Alternative employment/unemployment measures are important to capture different aspects of the employment landscape, which is why they are collected in the first place—the issue isn't unidimensional. But LFPR is not a better (or even a good, or even, without adjective, a) measure of unemployment.
> So you're okay with people who could work but have stopped looking for work to not be counted in U3 as unemployed?
Sure.
I'm also okay with them being counted in U-4 and U-5, and not being counted in U-1 and U-2.
> What are these "alternatives?"
U-1 through U-5 (excluding U-3 since it's the headline rate) are alternative measures of unemployment, LFPR is a measure of employment. All are within the scope of “alternative measures of employment/unemployment”. All have some value in understanding the broad issue, and none are perfect, unequivocally better than the others without a fairly specific purpose in mind, and LFPR is about the least useful of the set on its own (and is especially not useful as a measure of unemployment, since it treats classical unemployment as the same as employment.)
But a much bigger problem than choosing a less-than-ideal measure of unemployment is excessive focus on unemployment as the key measure of health of the economy. Distributional measures of income (while less conveniently unidimensional than picking one or the other un/employment rate) are much more useful there.
You missed my point that they're not counted meaningfully. U-3 is what is typically reported, so the others are irrelevant.
The "health" of the economy is a nebulous, academic abstraction when there are 100 homeless people camping under freeway underpasses outside my window, no federal livable minimum wage, workers gradually being paid less and less over decades while expected to work more and more, swelling ranks of billionaires cashing in on socialism they bought, and the burgeoning ranks of un- and underemployed who go neglected (maybe that explains part of Trump's base?) and undercounted. The MSM loves to parrot how "great" the economy always is because that's what advertisers want to hear, but it's tone-deaf when there was (and may still well be) more real unemployment than during the height of the Great Depression.
Wealth equality and employment are all most people care about. No one cares about the "health" of the rich people's casino "economy."
52 comments
[ 4.5 ms ] story [ 111 ms ] threadOr maybe there's section bias going on? ie. everything you're worried about is going up in price.
a) It's not journalists questioning these numbers, it's politicians and economists, and b) the criticism is long-standing and entirely accurate. Folks have been criticising this statistic for many years, and COVID has only made those criticisms more salient.
The top-line unemployment numbers factor out a large number of cohorts. For example, the number of people who've permanently stopped looking for work aren't counted.
COVID has inflated numbers in those cohorts and the top-line figure is likely understating these effects as a consequence.
Unfortunately, you've opted for a pithy dismissal based on, frankly, a cliche about mass media that offers no value or insight.
It's not that there was zero improvement; it's that the pace of recovery in most of the US was a small fraction (often near zero) of what it was in the wealthy regions.
Could it be because "not looking for work" was the result of more "natural" forces (disability, old age, etc) in years past?
This is my guess.
My interpretation is that the concern is that COVID is leading to more discouraged workers than would be expected under normal circumstances, and so the top-line unemployment numbers are now understating or failing to reflect a critical impact of the pandemic.
First Time Job Applicants are one new filth class.
Below a certain level of unemployment, the NAIRU models expect wage inflation (companies offering higher and higher wages to get new employees in a tight labor market) which drives inflation in the broader economy. This model kind of assumes that the labor force is inelastic. In reality if unemployment were low, a lot of “unemployable” or underemployed people would probably start looking for jobs, which makes it so current unemployment rates don’t accurately reflect how close we are to NAIRU.
I suspect that politicians have been hesitant to poke the bear on unemployment numbers since the top-line has been so low that they could claim victory, but we are now reaching a point where the signals are so far divorced from the reality that they have no choice but to integrate something else to bring it more in line.
[0]https://www.cnbc.com/2019/10/07/that-50-year-low-in-unemploy...
Note that unemployment in the US is measured by the Department of Labour, not the Federal Reserve, and likewise for the Fed’s other policy target, inflation — don’t measure what you regulate being the guiding principle. There are actually six measures of unemployment tracked by DoL’s Bureau of Labour Statistics, creatively named U-1, U-2, U-3, U-4, U-5, and U-6, described in Table A-15. Alternative measures of labor underutilization. Most critical and significant to this story is the determination of just who is, or is not, included in the definition of the denominator “US Labour Force”, which is now considered far too exclusionary a measure. As the article notes:
The fear is that a significant number of people will never return — and will be part of along-term economic scarring left by the pandemic.
Indeed.
I get the sense of surreality.
I wouldn't call them clowns. Clowns come prepared and have a plan. This representative group acted more like delusional cosplayers.
The pandemic didn't craft a new future, so much as accelerate the timetable of the one that was coming anyway.
Working from home took off because corp's legacy-driven resistance was eroded by catastrophic events rather than typical ones.
The shift here could be striking.
I understand that the total includes self-employed but it also includes underemployed.
I am convinced that the most important employment numbers are:
People who are insufficiently (less income than needed to sustain until death) employed. I believe that number is much higher than even total unemployed.
People who are critically (less income than needed for regular bills plus typical emergencies) un/under-employed.
Compared to the reality of Americans, OUR is full-on bullcrap.
"Does your current income situation allow you to comfortably meet your basic needs?" "If not, how much is your monthly shortfall?" would be better questions to gauge consumer financial health versus "Do you have a job?" I assume this would not paint a pretty picture of the American labor market.
On the other hand if you were making $200k last year and now you can't find a job that'll pay you more than $100k, you'll still be able to afford the necessities of life as well as quite a few luxuries, but that's still an immense reduction in economic output which suggests deep issues with the job market.
Underemployment is a measure of labor utilization. What you're describing is poverty, which is related but not equivalent.
I seriously doubt many policymakers except progressives have "lost faith" in UR because it can be selectively-sculpted to make the economy seem amazing.
Beginning a few years after 2008, came endless news reports of our recovering and robust economy. That was hard to reconcile during times mine/other families were eating nothing but rice (except when we couldn't afford rice).
Huzzah for only reporting from US's wealthiest regions.
Just like the recovery after the 2001 recession, that was hollow as shown by income distributional statistics: yes, there was an aggregate boom in both cases, and in both cases the gains were very concentrated at the top.
Unemployment/employment measures are about whether people have work, not whether they have money.
No, it's not, among many other reasons since treating LFPR as if it was unemployment treats, say, a demographic boom reaching retirement age as if it were a mass unemployment event.
Or a long term trend of increasing average years of education as, ceteris paribus, a long term trend of increasing unemployment.
Or a long-term trend of increasing incarceration and forced labor as, ceteris paribus, a long-term trend of increasing unemployment (it's a problem trend, but it's a completely different problem than unemployment.)
And, worst of all, LFPR completely ignores actual unemployment. If no one was employed and everyone was actively looking for work, you would have 100% LFPR even though you had 100% unemployment.
Alternative employment/unemployment measures are important to capture different aspects of the employment landscape, which is why they are collected in the first place—the issue isn't unidimensional. But LFPR is not a better (or even a good, or even, without adjective, a) measure of unemployment.
> Ceteris paribus
Quidquid latine dictum sit, altum videtur.
> If no one was employed and everyone was actively looking for work, you would have 100% LFPR even though you had 100% unemployment.
Impossible strawman and lack of common sense.
What's your answer then? You didn't provide any specifics. What are these "alternatives?"
Sure.
I'm also okay with them being counted in U-4 and U-5, and not being counted in U-1 and U-2.
> What are these "alternatives?"
U-1 through U-5 (excluding U-3 since it's the headline rate) are alternative measures of unemployment, LFPR is a measure of employment. All are within the scope of “alternative measures of employment/unemployment”. All have some value in understanding the broad issue, and none are perfect, unequivocally better than the others without a fairly specific purpose in mind, and LFPR is about the least useful of the set on its own (and is especially not useful as a measure of unemployment, since it treats classical unemployment as the same as employment.)
But a much bigger problem than choosing a less-than-ideal measure of unemployment is excessive focus on unemployment as the key measure of health of the economy. Distributional measures of income (while less conveniently unidimensional than picking one or the other un/employment rate) are much more useful there.
You missed my point that they're not counted meaningfully. U-3 is what is typically reported, so the others are irrelevant.
The "health" of the economy is a nebulous, academic abstraction when there are 100 homeless people camping under freeway underpasses outside my window, no federal livable minimum wage, workers gradually being paid less and less over decades while expected to work more and more, swelling ranks of billionaires cashing in on socialism they bought, and the burgeoning ranks of un- and underemployed who go neglected (maybe that explains part of Trump's base?) and undercounted. The MSM loves to parrot how "great" the economy always is because that's what advertisers want to hear, but it's tone-deaf when there was (and may still well be) more real unemployment than during the height of the Great Depression.
Wealth equality and employment are all most people care about. No one cares about the "health" of the rich people's casino "economy."
Wealth Inequality in America
https://youtu.be/QPKKQnijnsM