We all know the difference between the U-3 rate and the U-6 rate at this point (I hope), and so we all understand the perverse effect that a dwindling labor force can have on “the unemployment rate.” If you’re unemployed and looking for work, you’re part of the demand for labor that employers/suppliers are trying to meet. You count. if you’re unemployed and so deeply in despair about ever finding a job that you’ve given up looking, you don’t. Get enough people to give up and the labor force just might shrink to the point where marginal job gains overall can produce relatively steep drops in the U-3 rate. Which, of course, explains how America made sub-seven-percent magic last month with that 74,000-job stinkeroo.
We all know that (again, I hope) and we’ve all seen depressing graphs by now like the ones posted at Zero Hedge showing the slow, steady contraction of America’s labor force. The graph below, though, by Sean Davis of the Federalist, visualized the U-3/U-6 contrast in a way I don’t think I’d ever seen before. If you want to grasp just how few real gains have been made since the recession supposedly ended in June 2009, gawk away:
All we need is a few million more people to give up on job-hunting to reach 5% unemployment by the end of O’s term.
I genuinely don’t understand why, traditionally, the media’s emphasized the U-3 instead of the U-6 and I really don’t understand why they’d continue to do it after the Great Recession, with the public ever more aware of the dangers of long-term unemployment. Thanks to the Senate bickering over unemployment insurance, we just went through a new flurry of media coverage about the hardships of being laid off for six months or more. People’s skills get stale, they stop looking for work, and before too long employers start to view them as essentially unemployable. It’s a dire problem, the extent of which is masked by the prominence of the U-3. And yet headline-writers use the U-3 anyway. Go figure.
Here’s Scarborough and crew letting the cat out of the bag.