Mr. Gross is uncharacteristically trying to pull the wool over our eyes with this most recent story.

He suggests that unemployment is worse than it appears because "traditional methods of measuring unemployment...might not accurately portray the economic situation." As evidence he cites the U6 statistic which tries to measure underemployed and discouraged workers.

He notes, but for some reason ignores, the fact that the ratio between the U6 and the official unemployment rate is relatively constant. This, though, is the crux of the matter: As long as this ratio is constant, then the official unemployment rate *is* a useful tool for comparing the depths of employment problems during different recessions. The official unemployment rate isn't as bad as in the early '80s, so there's no reason to believe that the total fraction of un/under/discouraged workers is worse now than it was then, either.

If Mr. Gross could present evidence that disproportionately more workers were underemployed and discouraged, rather than traditionally unemployed, in the current crisis, then he *would* have a story.

"The official unemployment rate isn't as bad as in the early '80s, so there's no reason to believe that the total fraction of un/under/discouraged workers is worse now than it was then, either."

Did you look at the chart he linked? In 1982, the official rate ranged 8.6 to 10.8%. It seems Gross' point is that the new measurement method misleads unless one consults U6 for an apples to apples comparison. Then, one arrives at 11% unemployment (and rising if trends persist) exceeding the worst year of the 80's.

grichard:

I don't agree with Daniel's hop-scotching around the issue when it is so blatant that a smaller percentage of the Civilian Noninstitution Population is a part of the Civilian Labor Force. Participation Rate has never returned to the level that existed immediately after the 2001 recession. Job creation has not kept pace with the growth of the Civilian Noninstitutional Population.

Participation Rate was at 66.7-8% immediately after the 2001 recession. It dropped to 65.8% in 2003 (not see since the eighties and came back up to 66,3%. It is now at 66% and will drop to below 65.8% in the next 6 months. The data is reflected in Table A-1 which is more than enough evidence to prove that there is a problem between 2001 and 2008. To put a perspetive on the magnitude of the issue . . . from the sixties until 2001, the trend of Participation Rate was always upwards. This the first time in 40 +years the country has ever experienced a downward trend greater than a couple of months.

Some have placed the blame on the numbers of babyboomers retiring. Unfortunately, the numbers of babyboomers looking for work and their participation rate has been increasing. Seems that they can not afford to retire. Daniel has the right idea; but, I would use Table A-1 to prove it.

A question I would like the answer to is : is the percentage of women looking to work greater now than it was 25 years ago? If the answer is yes, then it makes it very difficult to compare unemployment rates from that era.

I know one thing: until Ronnie Raygun, it was easy to find a job in America. If you didn't get a job in 3 days of looking, you were totally shocked. Everyone I know my age recalls the same exact thing; its even in the movies and shows and books where a character is very upset when she or he hasn't got a job in 3 days.

Life went into decline for us in 1986, when the second Raygun budget kicked in, when you Republican scum started destroying the New Deal, and its been a slide down ever since.

Now the whole thing is collapsing and you still stand out there running your stupid #$#$ all over us, raining #_($*# down on our heads, next thing you know you will have us bombing and being bombed or worse.

What are those things, thermobaric or something?

It was impossible to find a job, any job under wrong way Jimmy. If you did find a job the 12% inflation destroyed your paycheck. I was there I know, Jimmy sucked.

The President has little direct control over the rate of inflation. The Chairman of the Federal Reserve is the personage to look at, if you are trying to assess blame or credit for the inflationary environment. The Chairman of the Federal Reserve during most of Carter's Presidency was Arthur Burns. [I call it 'The Crazy World of Arthur Burns', in homage to the song 'Fire!' by the Crazy World of Arthur Brown.] After the OPEC oil price shock of 1973, the unlamented Mr. Burns decided that Americans would need more money to pay the higher gasoline prices, and so he happily obliged by printing more money...which is tantamount to fighting a fire by tossing gasoline on it. The result was the inflationary spiral of the late 1970s, which was well under way long before Mr. Carter stepped into the Oval Office. President Carter eventually appointed Paul Volcker to the Chairmanship of the Federal Reserve. The best Fed Chairman we have ever had. It was Mr. Volcker who finally got inflation under control in this country, and indeed in the global economy, admittedly at the cost of the painful recession of the early 1980s. Why you would credit Ronnie Raygun for bringing inflation under control is a mystery, and it reveals a lack of economic understanding on your part. Mr. Reagan's policies of fiscal expansion, taken by themselves, would have added to the inflationary pressures, not eased them. Standard stuff in any intermediate macroeconomics textbook, and you could even read it yourself, if you tried.

Did you look at the chart he linked? In 1982, the official rate ranged 8.6 to 10.8%. It seems Gross' point is that the new measurement method misleads unless one consults U6 for an apples to apples comparison. Then, one arrives at 11% unemployment (and rising if trends persist) exceeding the worst year of the 80's.

The question you're ignoring is "what was the un/under/discouraged workers rate in 1982?" Otherwise your comparing X+Y(2008) to X(1982).

If the ratio of X to Y was constant between 2008 to 1982, then the we're still better off now than then, and in 1982 the real rate was MUCH worse than was stated, just like what he's claiming about now.

So true. If U3 and U6 follow the same curve, then they are both just as useful for comparing trends over time. The only advantage U6 has in this scenario is that the numbers are slightly higher.

Right; that's what I was trying to say.

I agree that if the ratio is constant over time, then the degrees of change (if that's what we're interested in) will be the same either way. However, if we want the most accurate picture of what is going on in unemployment, the U6 seems to do a better job of capturing what is happening. There's another reason to keep an eye on the U6, as well: if periods of heightened
traditional unemployment are prolonged, those who were once captured by the traditional measure may fall into the U6 measure (e.g. those who have given up looking for work or have taken a 15 hour/week position because they were unable to find full-time work in their job search). Thus, as the traditional unemployment rate stays the same or even declines, the U6 may increase. Even if they have functioned in lockstep in the past, there is reason to expect divergence if rates remain high over extended periods of time.

candoxx:

I know one thing: until Ronnie Raygun, it was easy to find a job in America. If you didn't get a job in 3 days of looking, you were totally shocked. Everyone I know my age recalls the same exact thing; its even in the movies and shows and books where a character is very upset when she or he hasn't got a job in 3 days.

Life went into decline for us in 1986, when the second Raygun budget kicked in, when you Republican scum started destroying the New Deal, and its been a slide down ever since.

Now the whole thing is collapsing and you still stand out there running your stupid #$#$ all over us, raining #_($*# down on our heads, next thing you know you will have us bombing and being bombed or worse.

What are those things, thermobaric or something?

Blaming Ronald Reagan gets you nowhere. A more astute observer will note that globalization was just taking off around this time. Countries like Russia and China and Eastern Europe were getting ready to dump Communism and join global markets. Communications were improving- the internet was just around the corner.

For the first time a US engineer, say, might have to compete for jobs with people from around the world.

candoxx:

I know one thing: until Ronnie Raygun, it was easy to find a job in America. If you didn't get a job in 3 days of looking, you were totally shocked. Everyone I know my age recalls the same exact thing; its even in the movies and shows and books where a character is very upset when she or he hasn't got a job in 3 days.

I would say that it's actually easier to find a job today than it was in the past, as there are many more service jobs today than there were in the past. But it's significantly more difficult to find a good job today than it was 30 years ago. It's almost hard to believe that there was a time when it wasn't terribly difficult to find a job that paid $20+/hr (in today's dollars) with good benefits right out of high school. It's even harder to believe that working your entire adult life at a single company and having a defined pension was ever the norm...

The best option is to to completely erase the pre-service economy out of our collective minds. Those factories aren't ever going to open again and those jobs are gone for good. That's just the reality of the 21st century.

DBuss,

Please re-read the 4th paragraph. "BLS did not account for...." does not mean what you are assuming relative to a constant ratio. Rather, prior to 1994 all individuals were lumped together as unemployed, thus the official rate in 1982 included those now in the new categories. One need only look at the precipitous drop of the reported unemployed after the new methodology began to be utilized to see the "official" unemployement rate of post 1994 was vastly under-reporting the real world.

Run is the official statistician here regarding particpation rates and so forth and has been making the case for years now that the reality has been significantly worse than has been reported for over a decade.

There was no U6 in the 80's so an argument claiming a constant ratio is vapid. See my answer to DBuss above as well as Run's post above this.