Unemployment falls below 9%

[JoeTheJuggler]

But the man who claimed his lavish spending and disastrous economic meddling would fix things should not be congratulated because the job market got so bad that people stopped looking for work.

But that's just begging the question. What evidence do you have that the January unemployment rate dropped because people stopped looking for work? The 10 year chart Ziggurat provided doesn't do that. Also, the fact that the economy added over 200,000 jobs last month shows that it's not the case.

And again, you can't distinguish between people who might've gone back to school because the opportunity was there (student loans or whatever) and people who only did so because the economy "got so bad".

 

[BenBurch]

Sure, but every metric we've been talking about in this thread measures something real. So I'm not sure what your or Ben's point is.

That what it measures is a poor stand-in for what you mean to show. So poor that it has almost no relation to it. Might as well show me a graph of marshmallow production.

 

[Ziggurat]

Again, the announcement of the January unemployment rate included the announcement that the economy added nearly a quarter of a million jobs. So even if the labor force participation rate remained low, it isn't what accounts for the decrease in unemployment.

As I said before, a bit over half of that number of added jobs is needed just to stand still because of population growth. The rest will indeed contribute to decreasing the unemployment in real terms, but time will tell if we can keep adding jobs at that rate or, hopefully, even faster.

ETA: Why do Ben and Tricky now have the same avatar? It's... creepy.

 

[BenBurch]

…

ETA: Why do Ben and Tricky now have the same avatar? It's... creepy.

It is in honor of Mr. Skinny, a dearly loved member of our JREF family who passed into history a few days ago.

 

[Bri]

Every metric is flawed. But the more metrics you use, the more accurate your understanding is likely to be.

Not in this case. The labor participation rate can't be used to determine the number of people who have given up looking for a job, therefore it sheds very little light on how the unemployment rate is affected by people who have given up looking for a job.

-Bri

 

[lomiller]

I never said that the official unemployment rate wasn't useful or meaningful. But if the unemployment drops because people have given up looking, is that an improvement.

If you are looking for a job, or a better job, yes this is still an improvement. This is why the number is valuable and reported the way it is.

I'm using it specifically to gain information about the employment situation, in particular to get information that the official unemployment rate doesn't measure.

What information is that? The unemployment numbers from the OP are an important metric because it’s an indicator of how much competition there is for available jobs, but what exactly does labour force participation tell us?

Which suggests that it's not actually a very good investment for those marginal case, or they would be going to school even if the economy was good. We've got an education bubble right now already.

Nonsense. In a globalized economy overall standard of living is directly related to overall levels of education. Developing countries may be able to grow their economies with low wage manufacturing jobs but the value of these jobs fall well below what’s required to sustain a first world lifestyle and captive low skill jobs inevitably fall to minimum wage. Without some form of post secondary education or training it’s already difficult to find a job that rises above poverty level and in the future it will become almost impossible.

 

[Ziggurat]

It is in honor of Mr. Skinny, a dearly loved member of our JREF family who passed into history a few days ago.

Ah, makes sense. That's sad news.

 

[MinnesotaBrant]

The unemployment rate might have fallen because there are no more extensions. This is assuming that the unemployment rate is tied to the number of people on unemployment.

 

[Ziggurat]

What information is that? The unemployment numbers from the OP are an important metric because it’s an indicator of how much competition there is for available jobs, but what exactly does labour force participation tell us?

How many people have jobs, obviously.

Nonsense. In a globalized economy overall standard of living is directly related to overall levels of education. Developing countries may be able to grow their economies with low wage manufacturing jobs but the value of these jobs fall well below what’s required to sustain a first world lifestyle and captive low skill jobs inevitably fall to minimum wage. Without some form of post secondary education or training it’s already difficult to find a job that rises above poverty level and in the future it will become almost impossible.

That doesn't really address my claim. Postsecondary education is expensive, both in direct and opportunity costs. And it simply isn't a worthwhile investment for everyone. That's most dramatically illustrated by people who cannot pay off their student debts even years later, but it's true even for some people who can pay off their student debts. That education on average is a net benefit doesn't mean that the current marginal consumers are getting a net benefit. And that's what we're discussing: marginal consumers of education, who have shifted to education because of current economic conditions. And marginal consumers are marginal precisely because they benefit from education less than the average.

 

[Bri]

In fact lower participation rates in the 16-24 age group may very well indicate people staying in school longer, getting more education, which in generally is good for a nations future economic prospects.

If this is what's happening, then that suggests the bad economy is what's driving people to choose school. But if you're choosing school because of the bad economy, that that means you wouldn't choose school if the economy was good. Which suggests that it's not actually a very good investment for those marginal case, or they would be going to school even if the economy was good. We've got an education bubble right now already. Telling me that it's inflating even more doesn't exactly raise my hopes.

The labor participation rate for the 16-24 age group has been decreasing fairly steadily since 2001, so it's not evident that the current decrease is because of the bad economy.

-Bri

 

[Bri]

The unemployment rate might have fallen because there are no more extensions. This is assuming that the unemployment rate is tied to the number of people on unemployment.

The unemployment rate is tied to the number of people seeking employment, so people who have given up looking for a job (possibly due to unemployment insurance running out) aren't included. Unfortunately, there's not a good way to tell how many people have given up looking for a job.

-Bri

 

[Ziggurat]

The labor participation rate for the 16-24 age group has been decreasing fairly steadily since 2001

No it hasn't. It's decreased unevenly, with most of the change happening in 2001-2002 and 2008-2009.

so it's not evident that the current decrease is because of the bad economy.

I disagree. I think the timing of when most of the change happens tells us exactly that.

 

[JoeTheJuggler]

As I said before, a bit over half of that number of added jobs is needed just to stand still because of population growth. The rest will indeed contribute to decreasing the unemployment in real terms, but time will tell if we can keep adding jobs at that rate or, hopefully, even faster.

Assuming population growth affects the work force proportionately across all age groups. But even so, I'm glad you finally agree with me that unemployment in real terms went down last month.

And yes, I prefaced all my remarks by saying that if this trend continues (very slow but positive signs of recovery), then Obama will be very hard to beat. The strongest claim GOP candidates can make will be that recovery should happen quicker (except when they lie and say that Obama has contributed to a worsening of the recession), and that therefore we should return to the policies that preceded the actual recession.

And again, I submit that the recovery of the stock market, the fact that banks have more cash than they can put to good use, and the fact that large businesses have high cash reserves argues against the supply-side fixes that the GOP candidates are proposing.

In fact, the single biggest driver of continued high unemployment has been loss of jobs in the public sector (especially at state and local levels).

 

[lomiller]

As I said before, a bit over half of that number of added jobs is needed just to stand still because of population growth.

Stand still in what regard?

 

[JoeTheJuggler]

Stand still in what regard?

The idea is that the economy needs to add some 120K jobs each month just to keep the unemployment rate flat due to population growth.

At any rate, the new jobs added in January contributed to a 0.2% drop in the unemployment rate. The decrease has been 0.8% since August. Modest improvement, but decidedly in the right direction.

 

[Ziggurat]

Stand still in what regard?

I did the calculation explicitly in terms of labor force participation earlier in the thread. Were one to do it in terms of unemployment, the number of jobs required to maintain level unemployment would be similar, assuming no other changes to employment than population growth and the number of jobs.

 

[lomiller]

How many people have jobs, obviously.

But participation rates don’t measure how many people have jobs, that is measured separately and continues to rise. (At least it continues to rise in the private sector, the US public sector has declined by some 1 million jobs in the last couple years.)

That doesn't really address my claim. Postsecondary education is expensive, both in direct and opportunity costs. And it simply isn't a worthwhile investment for everyone. That's most dramatically illustrated by people who cannot pay off their student debts even years later, but it's true even for some people who can pay off their student debts.

Again, without some form of post secondary education or training people are increasingly unlikely to get a job that will bring them above the poverty line. If there too many people can’t make that education/training pay off perhaps it’s time to look at why the cost is so high or take other steps to lessen the risk people must take on to get the education/skills they need to not live in poverty.

 

[lomiller]

The idea is that the economy needs to add some 120K jobs each month just to keep the unemployment rate flat due to population growth.

I understand that, but we already know the unemployment rate is dropping so we don’t need to look at some proxy that could tell us what the unemployment rate may be doing we can look at the real thing.

 

[DavidJames]

I understand that, but we already know the unemployment rate is dropping so we don’t need to look at some proxy that could tell us what the unemployment rate may be doing we can look at the real thing.

Sure, you know that and I know that, but doing it that way suggests Obama isn't the anti-christ of the economy. There must be ways to view the data such that Obama can continue to be viewed in the worst possible light.

It's a tough job but with the right tools*, it can be done.





*two of the best are a cherry picker and set of mobile goal posts.

 

[Ziggurat]

But participation rates don’t measure how many people have jobs

It's a fractional measure, but that's exactly what it measures.

If there too many people can’t make that education/training pay off perhaps it’s time to look at why the cost is so high or take other steps to lessen the risk people must take on to get the education/skills they need to not live in poverty.

I'm all for changes in how higher education and training is delivered, but that's a whole different thread, and it's not going to change quickly no matter what.