Is the Unemployment Rate an Accurate Measure of the Economy?

Ben Casselman in Five Thirty Eight asks: “Is the unemployment rate, now at 4.9 percent, an accurate reflection of the health of the economy?”

The latest annual Economic Report of the President, released Monday, President Obama’s top economic advisers “said that the people who gave up looking for work during the recession have by now largely returned to the labor force.”

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“The White House, of course, has an incentive to make the economy look as good as possible. So as a check on their number, I built my own simple model (an updated version of the one I used in this story a few years ago) to estimate how many people are still missing from the official unemployment rate … My model estimates there are as many as 1.5 million people who should be included in the unemployment rate. That’s triple the White House’s estimate, but it still implies the ‘real’ unemployment rate is down to 5.8 percent.”

“If there are really hundreds of thousands or even millions of willing workers just waiting to get back into the labor market, that means there is room for job growth to continue without driving up inflation. The participation rate has edged up in recent months, suggesting that the stronger economy is drawing workers off the sidelines. Next week’s jobs report will give the latest sign of whether that trend is continuing.”

5 Comments

  1. We have real economic problems, real job-related problems, and nobody can possibly deny that.

    But looking at most of the rest of the world, it does sometimes seem like America has turned into the national equivalent of Moliere’s Malade Imaginaire.

    We just want to believe the worst. We feel like everybody before us had it so great (which isn’t true) and that it’s never been this bad before (which sure as hell isn’t true), and that Somebody Out There is responsible for this (ehhh, maybe, but they’re probably just as baffled and clueless as we are, just a lot better cushioned), and c’mon. We’re not in a Depression. There are no breadlines. The banks are not refusing to give us our money.

    What kind of whiny wailing wimps have we become? Right and Left, but the Right most of all. I think the only thing that could get the Right talking about how good the economy was would be if they were back in the White House, but you know what? We’d probably have something to whine about then.

    1. I wish I could recommend your post 10x. It’s said, and it’s probably true, that American living standards have more or less stagnated since 1980. But it’s also true that Americans in 1980 were better off than 99.999% of humans who ever lived. The average American lives longer and better than the average Roman Senator or Chinese Mandarin, let alone the average Roman or Chinese citizen from those times.

      The other issue is what would the additional income produced by growth rates of the 1950s and 60s vintage, should it materialize, be spent on? Larger houses, fancier cars, more luxurious golf courses? The world environment is choking on the consumption of average Americans and all others at current levels of prosperity; I shudder to imagine how much quicker the ice caps would melt with even greater “prosperity”.

      1. We should all get to enjoy life’s pleasures; culture, travel, cuisine, BEER! (And I don’t mean that Budweiser/Coors piss). We should all have a taste of the good life. But we’ve gotten so hopelessly confused about what that really means, and we spend more and more, and it gives us less and less of a buzz.

        I think probably the emperors and mandarins got laid more, but otherwise, yeah–we’ve got it all over them. And we don’t have to worry about poison in our soup, unless some corporation put it there to cut costs.

        1. On the topic of beer (always a good topic), it’s worth noting that good beer was unobtainable at any price in the US until perhaps 20 years ago. Now the biggest problem is having too many excellent beers to choose from. That’s gotta be worth something, no?

          1. The biggest problem is the price. 12 ounces of good Belgian ale will run me as much as nine bucks at my local. Of course, you can’t drink more than two or three of those at one sitting (unless you have somebody to carry you home afterwards) so maybe it evens out. A treat. Not a habit to indulge on a daily or even weekly basis. But three times a month, say. My local makes some really good sandwiches, that serve as a fine accompaniment to the beer, but I will say that American microbrewers are overdoing it with all the damn IPA’s. Crowding everything else out.

            As for beer at home, there’s this wholesaler on 207th St. that has an amazing selection, at really good prices, if you don’t mind walking through a freezing warehouse, dodging forklifts, and bringing your own bags. As a bonus, the checkout girls are all pretty Latinas. 😉

            I think it was possible to get good beer before then, in some places, but it was never easy. In Eye in the Sky, by Philip K. Dick, some kind of cyclotron malfunction causes a handful of individuals to be able to reshape reality to their individual whims, one at a time. The protagonist has his turn, and all of a sudden he can find really nice Bock beers at the store.

            So I assume that’s what happened with America and beer, because I don’t know what else could explain it.

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