What is the real unemployment rate?
Gallup CEO Jim Clifton told an audience recently gathered for an annual dinner organized by the San Diego Regional Economic Development Corporation that the U.S. unemployment rate is more likely about 20 percent, according to a story in the UT San Diego.
Does it matter what the number is?
Yes, say those engaged in a “WonkFeud” at the Washington Post. “We fear that the labor market is weaker than we think, and we fear that discouraged workers who left the labor force might, with enough time away, never make their way back into jobs.”
It comes down to considering discouraged workers, according to a PBS business desk report. If you can imagine a workforce of 3, for example, it may help to explain things.
So, start with a workforce of 3 people.
“Two people are employed; one is not, but has looked for work in the past week. Unemployment rate: 1 in 3 – 33 percent. Economy turns bad. One of the two remaining workers loses her job. Unemployment rate shoots up to 67 percent. But this former worker can’t find anything and becomes so disheartened, she stops looking. A year goes by. She’s considered to have dropped out of the workforce, which officially has only 2 workers left. One is employed, thus unemployment drops to 50 percent. If the disheartened worker were to begin looking for work again, however, the workforce would again swell to 3, with 2 out of work: unemployment back up to 67 percent.”
A Center for Economic and Policy Research (CEPR) paper digs deep down and suggests:
“The Great Recession produced an unprecedented rise in long-term unemployment. The official measure of long-term unemployment, however, captures only part of long-term hardship in the labor market. A large portion of “discouraged” and “marginally attached” workers, as well as at least some portion of others “not in the labor force” by the official definition, would likely be counted as “long-term jobless” by most intuitive definitions. Similarly, given the persistence of high rates of involuntarily part-time workers, many of those currently classified as “part-time for economic reasons” are probably experiencing long-term labor-market hardship.”
Clifton, author of the 2011 “The Coming Jobs War” told his recent San Diego audience that answers to the unemployment issue won’t be found in Washington D.C., but rather locally.
“I don’t think there’s any limits for what you can do in San Diego or any other city when leaders get their strengths together and have a real deep concern about the town.”