The National Employment Depression Continues | The Weekly Standard

Big buzz today over the jobs number. The unemployment rate declined from 8.7 percent to 8.5 percent, a number derived from the so-called "household" survey from the Bureau of Labor Statistics, while the "establishment" survey saw an increase of 200,000 jobs.

Good news? Meh.This looks to be in line with the reports we have seen, more or less, over the last year, and an indication that we genuinely are in the midst of an employment depression.

First of all, the unemployment number is a huge analytical problem. It depends on worker psychology -- you have to be unemployed but looking for work to count as "unemployed." Even the so-called broader "U-6" number, which includes marginally attached people, depends on worker psychology. Both these numbers depend on worker psychology in a potentially "perverse" way: as optimism about job prospects wanes, these numbers can improve as people drop out of the workforce and thus no longer count as unemployed. Indeed, that is why today's number is at 8.5 percent -- if workers were as bullish about the job market as they were in December 2007, the unemployment rate would be something like 11.5 percent!

In my opinion, the best metric to track the unemployment rate based off the household survey is the employment-population ratio, which simply measures the percentage of adults who have jobs. Psychology does not enter into it. It's pure economics!





Link:The National Employment Depression Continues | The Weekly StandardT