Saturday, August 06, 2005

Unemployment Jujitsu.

The latest economic figures indicate that the economy is growing, with a better than expected 207,000 new jobs created last month. The figures suggest that the US now has the lowest unemployment rate since the terrorist attacks of September 2001. But figures can be misleading.

The unemployment rate is largely based on a call of 60,000 US households to determine who is or isn’t employed. What isn’t largely known is that the Bureau of Labor Statistics will count someone employed if they are working as little as a single hour a week. Those collecting unemployment insurance are not accurately counted either as only about 35% of the unemployed are eligible for unemployment insurance.

Helen Ginsberg, a economics professor at Brooklyn College, believes the actual unemployment rate may be much higher. Ginsberg suggests that the actual number may total around 18 million Americans who are unemployed, but who would like to work. Another 4.9 million workers are part-time workers who want full time work, but can’t find it. While as many as 5 million Americans are unemployed, but are not counted at all, since the BLS does not count those who have given up looking for work. Ginsberg suggests the actual unemployment rate is closer to 11.6% to 11.9%.

To make matters worse the economy must produce at least 150,000 new jobs a month just to keep up with the number of new workers entering the workforce. That would indicate that the “better than expected” numbers are only 57,000 net new jobs, the majority of which are in retail and food services, jobs with little security, benefits, advancement, and very low pay.

Meanwhile wages have virtually stopped or declined. Heather Boushey of the Center for Economic and Policy Research said, “the nominal wage growth has virtually stopped; the average hourly wage is up by only $.01 since August 2003.” The rise in cost of living has put a further strain on American workers. Meanwhile, the cost of health and other benefits has continued to increase since 2000.

This in a time where worker productivity has increased, indicating that Americans are working longer and harder for less.

But not everyone is hurting. Corporate CEOs have seen record tax breaks in the last 4 years, and in the last year their average yearly incomes has increased 54%.


Blogger MiamiMiami said...

One thing that the government also fails to count is the number of entreprenuers that have launched themselves. That is a number that is not registered and probably boosts the numbers of employment by double what is reported. Entreprenuership has dramatically increased because of the tax breaks that were put into place by Bush. That number of 207000 jobs are payroll jobs meaning that those were jobs created and placed on payrolls of corporations, they do not include the many entrepreneurs that have emerged.

8:39 PM  
Blogger MiamiMiami said...

Here is a good article. It is a little lengthy and about two months old but the information is still accurate.

June 03, 2005, 12:53 p.m.
Job Stats for Dummies
A guide for the mainstream media.

By Jerry Bowyer

It’s understandable if you’re a member of the general public and you’re perplexed about the dozen or so stats that appear in the monthly employment statements. But it’s not if you write business headlines for the New York Times.

Today the Times’s web edition ran a headline that said, “U.S. Economy Added Only 78,000 Jobs in May.” Of course, this statement is false. Total nonfarm employment, which is part of the Labor Department’s payroll survey, is what increased by only 78,000. This is not a measure of what the “U.S. Economy” is doing, nor does it purport to be. It is one survey’s attempt to measure payroll jobs and nothing else. It does not count self-employment, nor does it even attempt to do so. In addition, over the past several years, the payroll survey has habitually undercounted even the limited universe of payroll jobs. This is because the survey has trouble counting the payroll jobs of companies in the start-up phase.

The statistic that actually does attempt to measure the overall economy’s job-creation rate is found in the chart above. The statistic is called household employment. It went up by 376,000 for May, has increased by 2.6 million over the past year, and currently stands at slightly more than 141 million jobs. It is also the reason why the unemployment rate currently stands at its post-recession low.

Some people, including a notoriously inaccurate columnist for the same New York Times (perhaps he’s picking up some overtime writing headlines), have claimed that the reason unemployment is low is that people are leaving the labor force — meaning not only are they not employed, they aren’t even looking. This is also wrong: 360,000 people entered the labor force last month and 605,000 people entered the month before.

The chart above shows this. The upper line is the number of people who are in the labor force, which means they are either working now or are actively looking (within the past four weeks). The line beneath it represents those who are working. The gap between them therefore represents the number of people who are unemployed.

The conclusions are inescapable: The number of people entering the labor force has grown rapidly since the supply-side tax cuts of 2003. Meanwhile, the number of people who have found jobs during this period has grown even more quickly, so the percentage of unemployed people has been shrinking. The fact that most of this has been happening in the self-employed sector is a cause for celebration, not hand-wringing. After all, it’s a New Ownership Society that most Americans are shooting for in the first place.

5:34 AM  

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