The unemployment report that came out this week was something of a mixed blessing, as I reported earlier. The unemployment rate is coming down, the lowest it's been in two and a half years. But unfortunately, that number has less to do with jobs created than it does the chronically unemployed falling off the rolls.
The Department of Labor defines a "Discouraged Worker" as an unemployed person who has not found a job in over twelve months. Not that they don't want to work necessarily, but that they are unable to find work.
According to the U.S. Bureau of Labor Statistics, the top five reasons for discouragement are:
- The worker thinks no work is available.
- The worker could not find work.
- The worker lacks schooling or training.
- The worker is viewed as too young or too old by the prospective employer.
- The worker is the target of various types of discrimination.
Guess what the unemployment rate was twelve months ago? A near high of 9.8 percent. Those people are still looking a full twelve months later, but 315,000 of them don't count anymore as far as the BLS is concerned. Even still, Candy Crowley can't understand the concept of a discouraged worker. She asks Brookings Institution Fellow (and Obama Deficit Commission member) Alice Rivlin, who thinks this means that these chronically unemployed people are simply relying on a spouse for income:
CROWLEY: 120,000 jobs added; private sector jobs up 140,000; government jobs down 20,000.
I don't -- unless you're in the government, that -- you know, people think that sounds great. Long-term unemployed, 5.7 million; retail jobs, up 50,000; change in the labor force, down 315,000.
OK. So that down -- I want to talk about that down 315,000, because I don't know who people are that suddenly decide they're so discouraged they can't look anymore. Who is that?
ALICE RIVLIN, FORMER MEMBER, SIMPSON-BOWLES COMMISSION: Oh, I think it is people who've been looking for a long time, or maybe some more positive explanation, like their spouse just got a job, so they aren't looking as hard.
But it is the downside of what's happening at the moment. Jobs are being created, but not as many people are looking. So that helps the unemployment rate look a little better than it might otherwise look.
Sweet jeebus, save us from these privileged talking heads who can't understand how difficult life in the wealthiest nation in the world is for 99 percent of Americans. These people aren't magically now able to support themselves just because they've fallen off the official rolls that the Bureau of Labor Statistics use. They didn't voluntarily stop counting themselves as unemployed; the BLS did that. It's not that they don't want a job, it's that the search has been massively discouraging.
In the real world these “discouraged workers” know they are unemployed even if the Department of Labor does not count them. As has happened in the past, they’ll come out of the woodwork and take jobs as soon as jobs are available.
What is the actual rate and what does it mean for investors?
A very different rate occurs when one considers people who are only working part-time but want full time jobs and those who want jobs and will take them as soon as they become available: The real rate for November is far greater than 8.6% according to macroeconomists who analyze labor force participation rates. They look at November's population by age and sex and analyze it in terms of the very stable and very traditional historical hours the people in each age and sex group have been willing to work when jobs are generally available.
More specifically, the real rate of involuntarily idled labor, say the real economists, is 20.8% and rising. They report 20.8% of the labor hours that would be worked if jobs were available are not being worked. Moreover, they say, the 20.8% unemployment rate is conservative because people are living longer and because millions of Americans have lost their savings and pensions and will have to work longer in the future before they totally retire.
In other words, the real economists say unemployment in the United States is continuing to grow and the economy is continuing to sink further and further below its full employment level of output.
But Crowley and Rivlin--who has advised Democratic presidents on economics--seem blithely unaware of that.