
What's the Real U.S. Unemployment Rate? We Have No Idea - T-A
http://www.businessweek.com/articles/2014-08-27/whats-the-unemployment-rate-new-research-suggests-we-have-no-idea
======
curiouscats
The article provide interesting information on the process for calculating the
unemployment rate.

But it also misleads in saying "real US unemployment rate."

Dr. Deming would say "there is no true value" of any measured process. The
results depend on the process which includes the operation definitions.

[http://management.curiouscatblog.net/2009/11/05/deming-
there...](http://management.curiouscatblog.net/2009/11/05/deming-there-is-no-
true-value/)

Over time the value of a measure (as a proxy measure for some condition you
care to monitor) can change.

    
    
      http://management.curiouscatblog.net/2004/08/29/dangers-of-forgetting-proxy-nature-of-data/
    

It is important to update measures to avoid using proxies that lose value.

The unemployment rate certainly has proxy issues. But there is no "true
unemployment rate." There are ways to change the process to focus on different
things (make the proxy better matched to certain issues). But also it seems to
me, unemployment rate needs to have other related measures that are considered
in concert with the unemployment rate (such as the labor force participation
rate, perhaps some measure of under-employment etc.).

Those paying much attention do use other measures in concert but the last few
years I read lots of different people complaining that the unemployment rate
doesn't capture various aspects of how the job market is poor (and often
claiming the unemployment rate was "inaccurate" as though there was a platonic
form of the actual rate divorced from the measure process.

~~~
eruditely
Neg. At first glance obscurantist garbage. We do not need to hold ourselves
down to long definitions we can use various definitions and arrive at
meaningful conclusions. Probability has already solved most of these issues.

Operant knowledge is not blanket relativism.

------
nostromo
The official unemployment rate seems too complicated to me. I prefer
participation rate, which is very straight forward to measure.

The bad news is that participation rate in the labor force has continued on a
downward trend even as the economy rebounds.

[http://data.bls.gov/timeseries/LNS11300000](http://data.bls.gov/timeseries/LNS11300000)

I think a growing economy that does not create jobs should concern us all.

~~~
rayiner
Because U.S. demographics are rapidly changing, it's important to look at
these figures adjusted for the overall aging of the population:
[http://crr.bc.edu/wp-
content/uploads/2014/02/IB_14-4.pdf](http://crr.bc.edu/wp-
content/uploads/2014/02/IB_14-4.pdf) (page 3). The decline in labor force
participation rate is much less than it seems if you adjust for age.

~~~
nostromo
I agree, but still find it troubling. If a person is laid off, or if a person
retires and is not replaced, the net effect is still one less job.

If population growth continues to outpace job growth, we're going to end up
with a nasty game of economic musical chairs.

~~~
rayiner
Look at page 28 of this PDF:
[http://www.bls.gov/opub/ooq/2011/winter/art02.pdf](http://www.bls.gov/opub/ooq/2011/winter/art02.pdf).

From 2010 to 2020, the civilian labor force aged 16 to 55, prime working
years, is actually going to shrink by almost a million people. So the
population is growing, but more of those people are of ages where it is
typical to not work, so labor force participation rate can naturally be
expected to go down, even if nothing is wrong with the economy.

~~~
bjelkeman-again
And if there isn't a good pension scheme in place, public or private, it gets
interesting. Palm Springs was an interesting place. The only place I have been
where the dinners seemed all full of grannies working the tables.

------
chatmasta
I just came from a class today where Stephen Roach (ex chief economist at
Morgan Stanley) criticized this same gap between reported and actual
unemployment. He actually focused on a different worrying number:
participation rate. The number of people who qualified as "part of the labor
force" declined 3 percentage points, in the same period of time that
"unemployment" _increased_ by the same amount.

His point was that the way we model economics data will inherently result in
missed predictions. We need to remember this fundamental flaw of modeling when
we interpret the results of a model, like unemployment rate.

~~~
judk
Why is it surprising that participation drops as unemployment grows? x vs 1-x.

~~~
nhaehnle
Conceptually, the working age population is divided into participating and
non-participating. The participatings are further divided into working and
unemployed (and working-but-looking-for-more-work is a useful category as
well).

It is indeed unsurprising that participation drops in a period of high
unemployment, but it's not just a matter of mathematics. Instead, it's the
effect of people simply giving up looking for work.

That said, it's important to watch out for what the participation rate is
measured against. Obviously, the participation rate of the population as a
whole can drop for entirely benign reasons (higher percentage of retirees).

------
specialist
#1 I care more about the number jobs over time, not the unemployment rate.
Absolute numbers vs ratios.

#2 I also want to get an idea of how many people are over employed and under
employed.

\--

Payroll tax receipts show how many people are employed.

Then do a straight forward head count.

    
    
      Employment rate = jobs / people.
    

Then guessimate (tally) the number of hours worked.

    
    
      Yearly Employment load = hours reported / ( people * 2080 )
    

Why is this hard?

Why do we need sampling, when we can just measure the totals (with a margin of
error)?

Why do we have fudge factors like "discouraged workers"? People are either
working or they're not. Student, disabled, retired, whatever, they're still
unemployed. When elderly people continue to work past 65 and the working poor
have multiple jobs, I'm really not terribly interested in splitting hairs.
Break up employment rates by demographic group, if it matters that much.

~~~
clebio
I always figured that sampling, and electoral voting, are legacy mechanics
from when it wasn't as easy to tally large numbers quickly (via technology).
Real, per-person voting (there's probably a term for that?) -- and even
itemized taxation (e.g. choose schools, sanitation, law enforcement,
'defense', etc.) -- should be entirely within our capabilities now. But, of
course, politics is a slow-rolling stone.

~~~
byroot
> Real, per-person voting (there's probably a term for that?)

I suppose you mean direct election[0]

[http://en.wikipedia.org/wiki/Direct_election](http://en.wikipedia.org/wiki/Direct_election)

~~~
ctdonath
There are very good reasons for the "electoral college" outside of "real per-
person voting" issues.

~~~
mhurron
And they are?

The Electoral College is in place just for Presidential Elections because it
used to be that it was impossible for the various candidates to peddle their
platform all over the country. No other position had that issue, governors,
senators, congressmen are all far more local elections.

That issue doesn't exist anymore. There is no reason the president can not be
directly elected.

~~~
ctdonath
This is the United STATES Of America. The states cast their vote, balancing
the equality of states vs population - ensuring both that one large state
doesn't get outvoted by a couple much smaller ones, and that one large state
doesn't render multiple small ones politically impotent. CA & NY have strong
leanings toward urban political interests which conflict with legitimate
interests of WY, MT, AK, etc ... but in a direct vote, the former would
completely overwhelm the latter rendering their cumulative votes irrelevant.
With electoral college, we have a "progressive" vote whereby neither the
majority overwhelms the minority, nor the minority have an undue power over
the majority - instead, we have a sensible balance.

Switch to direct election, and there will be no need for the various
candidates to peddle their platform all over the country: candidates will
focus on high-density population regions, ignoring "flyover country" entirely
and unfairly biasing political power toward urban interests.

------
pessimizer
We know what the prime age employment rate is, though. I don't know what more
information this 'unemployment rate' is supposed to add to it.

[http://delong.typepad.com/sdj/2014/08/male-and-female-
prime-...](http://delong.typepad.com/sdj/2014/08/male-and-female-prime-age-
employment-rates-since-2000.html)

Why try to guess whether people are truly expressing their desires?

------
narrator
Shadowstats is a private firm that sells its own calculations of economic
statistics :

[http://www.shadowstats.com/alternate_data/unemployment-
chart...](http://www.shadowstats.com/alternate_data/unemployment-charts)

According to them, unemployment is about 23%.

~~~
hudibras
Shadowstats is a huge scam site. Their methodology is to to take the official
government numbers (unemployment, inflation, whatever) and add an arbitrary
constant to it to make the numbers more attractive to right-wingers so that
they'll fork over the annual fee to get "the real story."

I'm not exaggerating, that's their entire shtick.

~~~
jpatokal
I suspect you're exaggerating at least a tiny bit, since the difference
between their unemployment rate and the official figure is not constant:
theirs has been trending up over the past 4 years, while the official figures
are going down.

~~~
hudibras
As an example, if you look closely at the alternative unemployment chart that
rayiner linked to [0] you can see that the shadowstats line (blue) exactly
matches the U6 line (grey) down to the very last wiggle. Until 2010, that is,
when unemployment started going down and shadowstats needed to keep people
shelling out $175 a year.

[0] [http://www.shadowstats.com/alternate_data/unemployment-
chart...](http://www.shadowstats.com/alternate_data/unemployment-charts)

------
known
I'd say it's BLS numbers * H1Bs * 5

