What’s “Working”

In a recent blog we pointed out that the headline unemployment rate has been dropping lately.  Dr. John from Georgia replied, “The #’s may be improving (good) but I believe the (out of work) # is much higher than they are reporting!”  Here is our reply.

Your point about the questionable veracity of U.S. unemployment statistics is spot on.  When I look at the “participation rate” figures–which omits those people not considered part of the labor pool and therefore not officially unemployed–the picture seems quite different.  Despite a continuous, substantial increase in young folks just entering the labor pool after graduation, we see participation dropping.  The decline can’t be laid off entirely to retiring Baby Boomers; they aren’t retiring at such a rapid clip.  There remains a group working part time who want more hours or full-time positions.  Yet another group has become discouraged, putting its job search on temporary hiatus, or not looking for work altogether, waiting for the general situation to improve.  In the parlance of our Labor Department these folks are affectionately referred to as the “marginally attached” component of U-6.

Our low interest rate environment and quantitative easing programs seems to have boosted the fortunes of the country’s top 20% as measured by earnings (roughly $75,000 per year and up).  They show up in opinion polls as quite optimistic regarding the future.  The balance remains despondent at best, very discouraged, even angry, at the margin.  These folks do not consult their stock portfolio before budgeting expenditures for food, energy, shelter and medication, and their numbers could well be growing under the surface, out of sight.  If and when they come into view, I suspect we will face some very serious challenges.  Dust ups like the recent flap in Wisconsin will look like a cake walk should that occur.