The growth of bad jobs: a look at the official unemployment numbers Real unemployment is reflected in U-6, not the official U-3 numbers

From The Wall Street Journal:

U.S. Nonfarm Payrolls Rose 178,000 in November; Unemployment Rate Falls to 4.6%

Federal Reserve is likely on track to raise interest rates later in December

By Jeffrey Sparshott | Updated Dec. 2, 2016 12:03 p.m. ET

WASHINGTON—U.S. employers hired at a steady clip in November while the unemployment rate fell to the lowest level in nine years, signs of enduring labor-market growth that will likely leave Federal Reserve officials on track to raise interest rates later this month.

Nonfarm payrolls rose by a seasonally adjusted 178,000 in November from the prior month, the Labor Department said Friday. The unemployment rate dropped to 4.6% last month, the lowest level since August 2007 as some people found jobs while even more dropped out of the workforce.

There’s a lot more at the original.

Donald Trump was widely excoriated by the professional media for claiming that unemployment was much higher than the official numbers. We have noted previously this article from CNNMoney:

Most Americans think unemployment is a lot higher than 5%

Americans think the economy is in far worse shape than it is.

by Heather Long | @byHeatherLong | September 6, 2016: 2:28 PM ET

The U.S. unemployment rate is only 4.9%, but 57% of Americans believe it’s a lot higher than that, according to a new survey by the John J. Heldrich Center for Workforce Development at Rutgers University.

The general public has “extremely little factual knowledge” about the job market and labor force, Rutgers found.

It’s another example of how experts on Wall Street and in Washington see the economy differently than the regular Joe. Many of the nation’s top economic experts say that America is “near full employment.” The unemployment rate has actually been at or below 5% for almost a year — millions of people have found jobs in what is the best period of hiring since the late 1990s.

But regular people appear to have their doubts about how healthy America’s employment picture is. Nearly a third of those survey by Rutgers believe unemployment is actually at 9%, or higher.

Republican candidate Donald Trump has tapped into this confusion. He has repeatedly called the official unemployment rate a “joke” and a even “hoax.”

There’s more at the original.

Mr Trump was using the U-6 unemployment numbers, rather than the ‘official’ U-3 figures. The U-3 numbers include those people who are employed, plus those without jobs who are ‘actively’ seeking work; those who would like a job but have not been looking, because they are discouraged or for other reasons, are not included in U-3. U-6 is defined as “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force,” with Marginally Attached being defined as “those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.” In other words, U-6 gives us a more complete picture of what the unemployment situation really is, and it would seem, from Heather Long’s article, that the public see the U-6 number as more realistic.

And the U-6 numbers are telling a tale that is being completely ignored. I went back, looked at the official numbers, from the Bureau of Labor Statistics, downloaded the files on labor utilization, and found something truly disturbing. In good years and bad, through the Clinton and Bush Administrations, U-6 was never twice the U-3 number. During the recession in 1994, such a doubling never happened. During good years and bad, even during the so-called ‘Great Recession,’ it never happened.

But now, it has happened, with some frequency. I have converted the files to images, and the months highlighted in yellow indicate those months in which U-6 was twice, or more, U-3.

U-3 unemployment rate, by month, since 1994.

U-3 unemployment rate, by month, since 1994.

U-6 unemployment rate, by month, since 1994.

U-6 unemployment rate, by month, since 1994.

If you’ll look closely, you can see that even in those months where U-6 hasn’t been twice U-3, it has been close to it.

What this indicates, to me, is that the growth of jobs has been a growth of bad jobs, jobs which are insufficient to support people and families, but jobs in which employees feel stuck because there’s nothing out there that is better for them. This is why so many Americans simply don’t accept the official numbers, this is why Mr Trump was right to keep pointing out that the U-3 numbers were a joke and a hoax, and this is a big part of the reason that he won, and Hillary Clinton lost.
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Cross-posted on RedState.

3 Comments

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  2. There is one Very Important Chart kept by the Bureau of Lying Labor Statistics that say more than any other chart the purveyors of misinformation ever produce. This chart shows the Ratio of Working People with Jobs against the Population. It is listed as chart LNS12300000. It shows Obama’s Residency at 1600 PA Ave. NW started at 60.6% then dropped, and never made it back. This cart is located at http://data.bls.gov/pdq/SurveyOutputServlet

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