Unemployment: And now, we're all confused

A brief article at The Big Picture notes that many people misread the unemployment data by ignoring 'discouraged workers'. It's a good post -- some nice links to information about other ways to measure unemployment -- but there's something missing. Sure, if you look at the augmented unemployment rate, you'll find that the actual level of jobs/jobseekers isn't as good as we thought. But compare that to the official unemployment rate, and you'll find that this is always the case! The Augmented rate is almost always three to four points higher than the unemployment rate -- we aren't living at a time when there's an unusually large number of workers giving up; that's just a new way to read the same old data.

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posted by Byrne Hobart at 8:15:00 PM


Blogger Barry Ritholtz said...

The augmented unemployment rate will always be higher than the unemployment rate -- but by a varying amount. In 1995, it was nearly 5%, 96, 3.5%, 2000, it was 3%, In 03, just over 2%.

The larger issue is the question WHY the Unemployment Rate has dropped from 6.3% in 2002 to 5.2% in 2005. I have been arguing that its primarily due to the labor pool shrinking -- and not to more people getting jobs

The ramifications of this impact expectations for longer term economic expansion -- and how the market is likely to perform .

10:37 PM  

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