

Unemployment rate 10.2% - kp212
http://www.marketwatch.com/story/unemployment-rate-hits-102-in-october-2009-11-06-83100

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jamesbressi
No one get upset over the problematic math behind the unemployment rate.

Even when I took economics in university and we got on this topic, our
professor said that it is a very flawed number for such a numerous amount of
reasons, but until the government adopts a better way of substantiating, view
it as nothing more than a number that may or may not help you gauge the
economic climate.

In other words, there is some benefit in understanding our situation with this
surveyed number, but you should always question it and the media and
government will use it how they please for their own agendas.

The debate on the unemployment rate is very interesting; Google it if you have
time and read up.

~~~
jeromec
It's still a useful number as long as it's measured consistently. It may not
be a verbatim reflection of worker to full employment, for example, since it
doesn't count "under employed" or the people that want to work more hours, but
can't. However, if we know that the 10% it represents is more than triple what
we might consider normal then it can be a telling gauge.

~~~
btilly
_It's still a useful number as long as it's measured consistently._

Unfortunately it is not measured consistently over long periods of time.

~~~
dsplittgerber
The government in Germany some years ago messed around with the data and the
data set until all appeared well and some parts of the unemployed population -
apparantly mostly the long-time unemployed, who have no motivation left to
ever leave the welfare benefits system to work again - were just dropped from
the data set. Recognize that unemployment data is a government tool. It's one
of many interesting data points for one's analysis of the economic situation,
but by itself it's pretty meaningless as it's not consistently measured over
time.

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Femur
It is important to note that unemployment is a lagging indicator; we may be in
recovery while unemployment worsens for some time.

<http://en.wikipedia.org/wiki/Lagging_indicator>

~~~
Agathos
Did it lag so much on the way down?

~~~
jordanb
Yes. The recession began in late 2007. Unemployment didn't start spiking until
mid-2008.

What happens is that companies are not anxious to start laying off employees
when the economy goes south, for a variety of reasons. So they start spreading
less work among their existing workforce. Worker productivity and hours worked
both go down.

This makes these leading indicators. On the other end, when the economy starts
winding up at the end of a recession, the now-lean companies aren't anxious to
start hiring again. So instead they start giving their existing workforce more
work, asking people to work more hours, etc. So you have the opposite:
unemployment stays high for a while while productivity and hours spike.

Worker productivity is currently "surging":
[http://news.google.com/news/search?aq=f&um=1&cf=all&...](http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=worker+productivity)

However, hours worked is "holding steady":
[http://news.google.com/news/search?aq=f&um=1&cf=all&...](http://news.google.com/news/search?aq=f&um=1&cf=all&ned=us&hl=en&q=average+weekly+hours+)

What that means, I'm not qualified to say. And it looks like real economists
are (as always) of differing opinions on it. Ideally you'd want to see both of
those indicators on the up-tick, but given that one is increasing and the
other is not getting worse, it's probably a sign that unemployment is going to
start going down here pretty soon.

~~~
SamAtt
The problem I have with the "Late 2007" start date is it doesn't seem to be
backed up with facts. GDP grew in Q1 2008
([http://useconomy.about.com/b/2008/04/30/still-not-a-
recessio...](http://useconomy.about.com/b/2008/04/30/still-not-a-
recession-q1-2008-gdp-remains-at-6.htm)) and Unemployment was flat from Dec.
'07 to Jan '08 and actually went down a tick in Feb '08
([http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_i...](http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000))

In fact, GDP continued to grow in Q2 of 2008 (albeit slower) and in Apr. of
'08 the Unemployment rate was at 5% (up a mere .1% from Dec. '07).

I was always taught that a recession is 2 quarters of negative GDP growth.
Lately that definition has changed to "when economists say the recession began
based on rules they made up". The problem with that measuring stick is you are
defining behavior based on rules that are supposed to measure behavior. If
you've decided the unemployment rate is a lagging factor than you define the
Recession as having started earlier so that it fits the rule.

The reality is GDP didn't start to fall until Q3 of '08 and Unemployment had
been going up steadily since Apr. of '08 (a full 3 months before the start of
Q3). In my book that isn't a lagging sign.

~~~
jordanb
"Two consecutive quarters of negative GDP growth" is just a "rule ...
economists made up" too. And a totally arbitrary (albeit seductively simple)
one at that. The NBER look at when the economy actually starts slowing down,
not when some arbitrary amount of time has passed after the sign on national
GDP growth flipped over. It is more complicated, yes, but also more
sophisticated and rigorous than the old rule of thumb.

When it comes to indicators, the fact is that the definition of 'recession' is
pretty irrelevant. Your rule of thumb is backward-looking and thus pretty much
useless for figuring out how the economy is going to move anyway. You can't
know the economy is in trouble until it's already been there for two quarters,
eh?

Likewise with unemployment, if you ignore the other indicators you won't know
something is going wrong until you're already deep into it (and it starts
getting reflected in unemployment data). Whereas if you pay attention to
leading indicators like productivity, you'll be able to better predict what
unemployment is going to do.

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btilly
Two things about these figures. The first is that you shouldn't believe any
historical comparisons. Over the years the US definition of unemployment was
revised multiple times, and each time it was revised it was to a methodology
that gave lower numbers. Therefore you aren't comparing apples to apples when
you compare current figures with, say, the recession in the early 80s.

The other thing to consider is that we aren't out of the woods yet
economically. There are still a lot of credit issues out there. You can see
[http://bentilly.blogspot.com/2009/11/is-financial-crisis-
rea...](http://bentilly.blogspot.com/2009/11/is-financial-crisis-really-
over.html) for a list of some of them. And continued jobless numbers are not
about to help.

~~~
vire
Great link. Thanks. Funny thing is, when just about everyone I knew was
"getting their war on" and "getting their granite countertops on", it all felt
ominous to me. I'm afraid that the U.S. is in for a very humbling penance.

