Although you have to dig into the statistics to know it, unemployment in the United States is now worse than at any time since the end of the Great Depression.
From December 2007, when the recession began, to May of this year, 6.0 million U.S. workers lost their jobs. The big three U.S. automakers are closing plants and letting white-collar workers go too. Chrysler, the worst off of the three, will lay off one-quarter of its workforce even if it survives. Heavy equipment manufacturer Caterpillar and giant banking conglomerate Citigroup have both laid off thousands of workers. Alcoa, the aluminum maker, has let workers go. Computer maker Dell and express shipper DHL have both canned many of their workers. Circuit City, the leading electronics retailer, went out of business, costing its 40,000 workers their jobs. Lawyers in large national firms are getting the ax. Even on Sesame Street, workers are losing their jobs.
The official unemployment rate hit 9.4% in May—already as high as the peak unemployment rates in all but the 1982 recession, the worst since World War II. And topping the 1982 recession’s peak rate of 10.8% is now distinctly possible. The current downturn has pushed up unemployment rates by more than any previous postwar recession (see Table 1).
Source: Table A-1, Bureau of Labor Statistics, U.S. Labor Department, www.bls.gov.
Some groups of workers are already facing official unemployment rates in the double digits. As of May, unemployment rates for black, Hispanic, and teenage workers were already 14.9%, 12.7% and 22.7%, respectively. Workers without a high-school diploma confronted a 15.5% unemployment rate, while the unemployment rate for workers with just a high-school degree was 10.0%. Nearly one in five (19.2%) construction workers were unemployed. In Michigan, the hardest hit state, unemployment was at 12.9% in April. Unemployment rates in seven other states were at double-digit levels as well.
As bad as they are, these figures dramatically understate the true extent of unemployment. First, they exclude anyone without a job who is ready to work but has not actively looked for a job in the previous four weeks. The Bureau of Labor Statistics classifies such workers as “marginally attached to the labor force” so long as they have looked for work within the last year. Marginally attached workers include so-called discouraged workers who have given up looking for job-related reasons, plus others who have given up for reasons such as school and family responsibilities, ill health, or transportation problems.
Second, the official unemployment rate leaves out part-time workers looking for full-time work: part-time workers are “employed” even if they work as little as one hour a week. The vast majority of people working part time involuntarily have had their hours cut due to slack or unfavorable business conditions. The rest are working part time because they could only find part-time work.
To its credit, the BLS has developed alternative unemployment measures that go a long way toward correcting the shortcomings of the official rate. The broadest alternative measure, called “U-6,” counts as unemployed “marginally attached workers” as well as those employed “part time for economic reasons.”
When those adjustments are taken into account for May 2009, the unemployment rate soars to 16.4%. That is the highest rate since the BLS began calculating the U-6 rate in 1994. While not exactly comparable, it is also higher than the BLS’s earlier and yet broader adjusted unemployment rate called the U-7. The BLS began calculating the U-7 rate in 1976 but discontinued it in 1994 in favor of the U-6 rate. In the 1982 recession the U-7 reached 15.3%, its highest level. In fact, no bout of unemployment since the last year of the Great Depression in 1941 would have produced an adjusted unemployment rate as high as today’s.
Why is the real unemployment rate so much higher than the official, or U-3, rate? First, forced part-time work has reached its highest level ever, going all the way back to 1956 and including the 1982 recession. In May 2009, 8.8 million workers were forced to work part time for economic reasons. Forced part-timers are concentrated in retail, food services, and construction; about a quarter of them are young workers between 16 and 24. The number of discouraged workers is high today as well. In May, the BLS counted 2.2 million “marginally attached” workers. That matches the highest number since 1994, when the agency introduced this measure.
With the economy in the throes of a catastrophic downturn, unemployment, no matter how it’s measured, will rise dramatically and impose yet more devastating costs on society and on those without a job or unable to find full-time work.
John Miller teaches economics at Wheaton College and is a member of the Dollars & Sense collective.
Sources: U.S. Dept. of Labor, “The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization,” Issues in Labor Statistics, June 2008; John E. Bregger and Steven E. Haugen, “BLS introduces new range of alternative unemployment measures,” Monthly Labor Review, October 1995.
From DollarsAndSense.org
Related articles:
{ 3 comments… read them below or add one }
I read the accounts of expected economic collapse with sadness. It could all have been avoided had better economic control with previous growth rates and emphasis to move us away from an oil-based economy. As Olduvai theory states, it can be that an industrialized economy based on limited fossil fuels and attempting exponential economic growth evventually collapses. The desperate attempt by the USA to invade Iraq and Iran to requisition oil reserves there only keeps this exponential growth continuing a little further, but does not solve the underlying problem.
Population control is a very important issue but not properly addressed; we need controlled population reduction by stirct control within society. We need emphasis on conservation and energy efficiency. We need emphasis on alternative sustainable energy systems. We need emphasis on maintain the sustainable quality of food producing areas of the World.
The fact is, because of aggressive competitive nature of human mental function, we lack the ability to coordinate on a World scene to the extent necessary to save the situation. This means that fractal catastrophic collapse of our economic system is indeed very possible, even if most people are in a state of denial of such a possibility.
Entropy is reduced when there is easy access to energy flow to create order. When that energy flow dimineshes, the state of entropy within the World increases. This is a fundamental law known from thermodynamics. What we are experiencing especiall in the USA is an increase in entropy as the USA spirals to choas. This was known to President Bush and colleagues who pressed desperately to access by invasion the cheap oil in Iraq and Iran. The problem for President Bush et al., and now President Obama, is that the gamble of invading Iraq and potentially invading Iran has not paid off in time to save the US economy. Families behind the Federal Reserve (e.g. the Bildenburgs and Roschilds) who really control the World via economics have manipulated the US industrial-military complex to their own benefit. The collapsing US economy is not perhaps to their liking although these families make their money from war and conflict (e.g. selling armaments from Lockheed Martin). Their gold assets will be be worth a lot for buying up assets once the US dollar has become worthless in a wave of hyperinflation. This allows these families to strive yet harder to invade the Middle East for its oil reserves. However, when the oil is finally depleted and the US economy collpases, so does the wealth of these wealthy oligarchy families behind the Federal Reserve. If these families had any sense, they would support the endeavours to renewable sustainable energy systems remote from oil, and would participate in a peaceful manner to have an organied non-brutal reduction in the World population. This is our only hope.
Strange how the “real” unemployment rate is all of a sudden important now. When the “official” unemployment rate was 10.8% in 1982, what was the “real” rate then? After all, the numbers not being counted today…underemployed and those who have stopped looking…weren’t counted in 1982 either. The author seems to want to compare apples to oranges and come off as having made rational, logical conclusions.
The “real” unemployment is merely putting perspective on the “official figures”. Many countries also have changes their ways of “measuring” unemployment over the years so its not apples and oranges.
At the end of the day what counts though is the reality and the reality is unemployment is real and severe.