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What Is the Real Unemployment Rate?

2017-01-10 · explainer · John · 5:21 · watch on YouTube

Topic: Economics · mode: News analysis · tags: timely hook, civic or action cta

After the BLS reported 4.7% US unemployment for December, John explains why claims of a 'real' rate from 6% to 38% differ (labor force participation and the U3-U6 measures) and argues that, however measured, unemployment is low but could be lower, while median household income has not fully recovered, so the debate should start from agreed facts.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — The 4.7% BLS figure versus rival 'real' rates; agree on facts before discussing them

  • ★★★ John says the Bureau of Labor Statistics announced last week (week of 2 January 2017) that US unemployment in December was 4.7%, near its lowest in nine years and fairly near its lowest since the early 1970s. — 00:00:01 · United States
  • ★★ John says people may also have heard that the 'real' US unemployment rate is 6%, 9.2%, 20% or even 38%. — 00:00:14 · United States
  • ★★ John says this seems one example of how, in current political discourse, people reach vastly different conclusions because they look at different sets of data. (hedged) — 00:00:21
  • ★★★ John argues that until we agree on what the facts are, we cannot meaningfully discuss what they mean. — 00:00:29

00:00:36 — The 38% claim is labor force participation, which falls mainly because Americans are ageing

  • ★★★ John says the 38% figure refers to the labor force participation rate, the share of Americans over 18 working or looking for work, which fell over 20 years from over 67% to under 63%. — 00:00:36 · United States
    • a number in question (slip of the tongue): "18" — check against the recording
  • ★★★ John says by far the biggest reason for the decline is that Americans are getting older, so a higher share have retired. — 00:00:52
  • ★★ John says even for people aged 25 to 54, participation has fallen about 1.5% since the Great Recession and about 3.5% since its late-1990s height. — 00:01:00
  • ★★ John says the two biggest factors seem to be more people choosing to be full-time parents and more students in professional and graduate schools. (hedged) — 00:01:12
  • ★★★ John says the latest data show 90 of the 95 million Americans not in the workforce say they don't want a job now; the other 5 million, 3% of the labor force, is still a lot. — 00:01:19 · United States
  • ★★ John says some of the decline is probably due to lack of job opportunities: people retiring early after losing a job, or students who could be tempted into work. (hedged) — 00:01:30
  • ★★ John says smart people disagree how much of the decline is due to the economy, but on its own the statistic says little about unemployment. — 00:01:46
  • ★★ John says the participation rate will keep declining as the population ages, whether the economy is good or bad. — 00:01:56
  • ★★★ John says calling 38% the real rate implies unemployment was 41% in 1967 and never lower than 33%, in 2000. — 00:02:02

00:02:15 — The U3, U4, U5 and U6 measures; international comparison and labor market slack

  • ★★ John says the US Census Bureau surveys 60,000 households monthly and releases six unemployment rates on the first Friday of each month, four of which matter here. — 00:02:17 · United States
  • ★★★ John says U3, the official number, counts adult civilians without work who looked for a job in the last four weeks, and is currently 4.7%. — 00:02:30
  • ★★ John says U4 adds discouraged workers, who stopped looking because they believe no jobs are available, raising the rate to 5%. — 00:02:41
  • ★★ John says U5 adds marginally attached workers, who want work but haven't looked recently because of family responsibilities or classes, bringing the rate to 5.7%. — 00:02:52
  • ★★★ John says U6 adds part-time workers who want full-time work, bringing the current rate to 9.2%. — 00:03:06
  • ★★★ John says which of these is the 'real' unemployment rate depends on what you are trying to measure. — 00:03:14
  • ★★ John says U3 matches international standards, allowing comparison: a similar measure puts Brazil at 12%, Germany at 4.1% and Spain at 19%. — 00:03:18
  • ★★ John says U6 shows labor-market slack; the U3-U6 gap is slightly higher than before the 2009 recession, suggesting there may be more room for job growth than U3 implies. (hedged) — 00:03:32

00:03:56 — Don't mix measures; unemployment is below the postwar average; incomes still recovering

  • ★★★ John says the most important thing is not to compare oranges with grapefruits by mixing measures, which happens a lot in political conversations now. — 00:03:56
  • ★★★ John says '10% at the recession's height, still 9.2% now' mixes measures: if it is 9.2% now it was 17% then; if it was 10% then, it is 4.7% now. — 00:04:04
  • ★★★ John says by either measure US unemployment is below its average since World War II but still somewhat above full employment. — 00:04:17 · United States
  • ★★★ John says people need good jobs, not just jobs, and on that front the recovery from the recession is probably unfinished. (hedged) — 00:04:28
  • ★★ John says median household incomes are likely still lower than in 2007, though final 2016 data are not yet available. (hedged) — 00:04:35
  • ★★★ John sums up: however measured, US unemployment is low but could be lower, and median household income is rising but not yet at all-time highs. — 00:04:42 · United States
  • ★★ John says if we can agree on these facts, maybe we can discuss how to continue or even expand the economic recovery. (hedged) — 00:04:50

00:04:58 — Apology to non-American Nerdfighters, asks for topics and Oscar favourites; Hidden Figures

  • ★★ John apologizes to non-American Nerdfighters for such an American video amid a US political discourse crisis and asks for non-American topics in comments to cover next week (week of 16 January 2017). — 00:04:58 · Nerdfighteria, United States
  • ★ John is off to see Hidden Figures a second time because he liked it so much. — 00:05:08
  • ★★ John asks viewers to say in comments which Oscar-contending movies they like best; his favourites are Hidden Figures and Moonlight. (hedged) — 00:05:11

In the description and comments

  • ★ John thanks Rosianna for all the charts and graphs in the video. — video description · Rosianna Halse Rojas
  • ★★ Among his sources, John points to a highly detailed article he found helpful on the causes of the decline in labor force participation, and an easier-to-read overview in The Washington Post. — video description
  • ★ John invites viewers with specific questions about the figures to ask, and says he will try to add sources for them. — video description

Threads in this video

Where the stories that moved here went next

Mentioned

Central: Labor force participation rate · Unemployment · United States

Also: Works: Hidden Figures · Moonlight

Organizations: Bureau of Labor Statistics · United States Census Bureau

Concepts: Discouraged worker · economic growth · Full employment · Income · misuse of statistics · Population ageing · post-truth politics

Places: Brazil · Germany · Spain

Events: Academy Awards · Great Recession · World War II

Only in the description or credits: Rosianna Halse Rojas · The Washington Post

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