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April 2010 Unemployment

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turboimpala

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If 290,000 new jobs were added in the US in April, why did the unemployment rate increase from 9.7 to 9.9% ?

Am I missing something?

I've read this in several articles within the last day.

The unemployment rate does not count 'discouraged workers' -- people who lack jobs but have given up looking for employment. I think what's going on here is that the number of jobs in the economy increased, but the number of people looking for work increased even more. The result is a higher unemployment rate in the face of job creation. This is actually a positive sign for the economy: it means that people who had given up on finding jobs are now trying to return to the workforce.

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The unemployment rate does not count 'discouraged workers' -- people who lack jobs but have given up looking for employment. I think what's going on here is that the number of jobs in the economy increased, but the number of people looking for work increased even more. The result is a higher unemployment rate in the face of job creation. This is actually a positive sign for the economy: it means that people who had given up on finding jobs are now trying to return to the workforce.

How and why do they count or not count "discouraged" workers?

How can those numbers possibly be accurate?

If I leave my job and don't tell the department of labor if I'm looking for a job or not, what do they count me as?

Will I be considered a discouraged worker?

Where's the form to sign up for this category?

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Here's a better question - How many people are employed by the department of labor to count these so called discouraged workers?

I'd like to see a graph of privately employed citizens over the last 130 years, where citizens employed by government or companies totally funded by government are not counted in the employment number.

That would probably start at over 90% and be around 35-40% now?

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How and why do they count or not count "discouraged" workers?

How can those numbers possibly be accurate?

If I leave my job and don't tell the department of labor if I'm looking for a job or not, what do they count me as?

Will I be considered a discouraged worker?

Where's the form to sign up for this category?

You don't contact them. They derive their numbers from conducting an over the phone poll. Is it accurate? Probably not. Especially if you compare the numbers to the payrolls of companies.

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How and why do they count or not count "discouraged" workers?
The "headline unemployment rate" that is commonly reported comes from the answers to two questions:

  • are you employed?
  • if not, do you want to be employed?

Take the first question. Is a person employed if they are working 2 hours a day? The government uses 15 hours a week to determine if a person is employed. The person may not even draw an official salary (e.g. helps at family store for 15 hours a week).

Take the second question. How do we know (more) objectively if a person really wants to be employed? The government asks whether the person has actively tried to look for work within the last 4 weeks. If the person has not done so, they're considered to be outside the workforce (like a full-time housewife or a full-time non-working student might be). [more here]

Together, this means that the "headline unemployment rate" hides two important things: it hides those who have tried looking for work, and have decided to wait a few months before trying again (discouraged workers). It also hides the people who have had their hours cut back, but are still doing 15 hours or more each week.

If one looks at the detailed report, one can see how many people are working part-time even though they really want full-time work, and how many people want work but have not looked actively in the last 4 weeks.

In addition to this survey (called the "Household Survey"), there is parallel approach (called the "Establishment Survey") which looks at businesses and sees how their employment is rising or falling.

Though a few numbers get all the press, a lot more detail is available.

In summary, this is what the data tells us ... In this downturn, we've seen a much deeper and longer deterioration in the job-picture than ever since the Great Depression. It appears that the job picture has stopped deteriorating, and that it has been flat for a few months. The future is unclear, but if the improvement parallels the fall (as is quite common) we will not get back to 2007 levels till late 2012 (see this).

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