Workforce participation seen rising to 63.3% in 2019 from 62.9% in January
By Josh Zumbrun | Updated Feb. 9, 2017 10:22 a.m. ET
Broader measures of unemployment favored by President Donald Trump are unlikely to see much improvement in coming years, according to a new WSJ survey of economists.
Mr. Trump frequently criticized the official jobless rate on the campaign trail. His Treasury secretary nominee, Steve Mnuchin, outlined a wider report card of labor-market health to Congress.
Many economists share Mr. Mnuchin’s view that it is time to pay more attention to such broader measures, which could become an increasing focus of markets and policy makers.
“In a complex economy, there should never be just one summary statistic,” said Diane Swonk, founder of economics consultancy DS Economics.
There is a lot more at the original, and really, I’d like to quote the entire article! It notes the differences between the various measures of unemployment. It goes on to note that Treasury Secretary-designate Steve Mnuchin said that too much attention is paid to the ‘official’ U-3 unemployment rate, without looking at the alternative measures. Secretary-designate Mnuchin apparently favors the U-5 rate, which includes the “marginally attached” and “discouraged” workers, whereas I prefer to use U-6, which includes the ‘underemployed,’ people stuck in part-time jobs but who want and need full-time employment.
- U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
- U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
- U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)
- U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
- U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force
- U-6 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
- NOTE: Persons marginally attached to the labor force are 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. Updated population controls are introduced annually with the release of January data.
But whether we use Mr Mnuchin’s U-5 or my preferred U-6 measure, both indicate that the unemployment problem in the United States is worse than the rosy claims the Democrats were making about the U-3 unemployment rate. The difference, however, is considerable: U-5 currently stands at 5.8%, while U-6 is pegged at 9.4%. If employment conditions improve, U-5 can be expected to drop, but U-6 will definitely be a harder nut to crack.
But the Trump Administration has put itself on notice: by having Mr Mnuchin touting U-5 in public, and the President himself having talked about the U-6 rate during the campaign, the Administration has foreclosed the use of U-3 as a selling point on whatever progress is made in the economy. And I think that we can count on the Democrats to start talking about those “alternative measures” of labor underutilization every time they think they have a chance to attack President Trump.
I do not believe that the government controls the economy, but President Trump has already set the benchmark by which he should be judged: he pledged the creation of 25 million new jobs, over the next ten years, and a return to 4% real growth.
Those will be very difficult goals to achieve, but when you set the standards by which you say you should be judged, then those are the standards by which you will be judged.