$318 Billion Deal Is Set in Congress for Cutting Taxes

Tartarin wrote:

My impression is that circumstances have changed and once-valid methods of measurement no longer are.

I hadn't considered that possibility, but you could be right. Of course, as you point out; either way people are out of work and the numbers aren't encouraging.

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In that report, Scrat, there was a pretty good description of the process they use, and to this layperson it sounded like hooey -- particularly when a commentator pointed out HOW it was hooey! The description was reminiscent of a pollster describing a methodology which boils down to a sample of 1036 representing the entire nation. Okay, okay, it may be statistically satisfying, bud, but it don't work for me!! My response usually is (back in the impolite section of my brain), Okay, fellas, get off yr butts and go out and interview several million more people, and even then I won't believe the results unless you've talked to me and my friends!

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Three things in the current recession:

1) The welfare system was drastically changed during the Clinton administration. When you are out of work, you can be on the system for months - not years. Therefore, the unemployment roles go down when someone falls off the roles. The belief is that if you haven't found a job by x, then you are just not trying and wishing to scam the system. Bush has twice extend benefits for a few months, but we are way into the recession and those jobless are long ago off the roles. This means there are far more unemployed not counted today than there were in the past.

2) Many career women who have put off child bearing have decided that since they are laid off, they would just go ahead and have those babies. This is a situation that is new in sociological terms.

3) Under long term recessions, people go back to work far under their abilities, and therefore they are making much less than they would have before. This also is a downward escalating problem that eventually takes a job away from the lowest scale worker. Therefore, someone who wasn't previously counted in the unemployement figures not being able to get a job. It also affects newly entering people into the workforce such as high school graduates, drop outs and retirees who need more money than retirement benefits give them (an increasing number of non counted unemployed).

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BillW, I agree with your observations. What surprises me the most is the fact that even in our area of Silicon Valley where home prices are over half million dollars (we're not talking mansions), we still have many young children in our area. Our next door neighbors from the UK both have PhD's, but the wife stays home with two young children. c.i.

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Thanks, Bill, for the good sense and precision -- and the facts!!

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Tartarin,

Here is the information you requested. Now that I have relistened to the report I also remember the dooms day bell pealing later on in the report. This is a very scary report so anyone faint of heart - do not listen to it. The report is about half way down - surprisingly, right after an upbeat report on the Stock Market:

http://discover.npr.org/rundowns/rundown.jhtml?prgId=3&prgDate=July/2/2003

Quote:

Commentary: Economic Data

Commentator Kevin Phillips says it's time for the federal government to consider all economic data before deciding on how to stimulate the U.S. economy.

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I will listen to Kevin Phillips AFTER a beer, Bill! (He's one of my alltime favorites but he does manage to lay on a dose of reality...)

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Tart - I wonder whether they are sticking with the existing methods because a change in how they measure unemployment would cause a break in the number stream; they might have more accurate numbers, but wouldn't be able to make valid comparisons to previous historical data. ??? Just a thought.

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But it isn't valid as is. In accounting, with changes in reporting or data being reported, there must be footnotes.

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BillW - Unemployment benefits are not part of the "welfare system" and I know of no change that was made to the method of providing benefits or the timeframe for which one is eligible under welfare reform.

Further, the unemployment numbers are not simply a count of unemployment claims (in fact, it is absolutely NOT that), so the claim that the numbers are suppressed by people "falling off the rolls" does not seem to square with the facts.

Quote:

Another factor behind the increase in the overall civilian unemployment rate was the increase in the number of people seeking work in June. Optimism about an economy rebound led over 600,000 people to resume their search for work.

Because the government calculates the overall unemployment rate based on a survey of American households, and because the lacklustre economy wasn't producing enough jobs to accommodate an increasing number of job-seekers, that rate increased significantly.
U.S. unemployment rate highest since '94

That's just one source. You can check a bunch using this link:
http://news.google.com/news?hl=en&q=unemployment+survey+households

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Quote:

http://www.missouri.edu/~econsr/ps1_key_econ311_fall2002.pdf

Economics 311: Labor Markets, Employment and Wages

Fall 2002

Problem Set #1: Introduction due: Monday, 9/30/2002

1. Employment and Unemployment Calculations
Suppose you have the following labor market data:

Population = 500
Population age 16 years and older and non-institutionalized = 400
Persons employed full or part-time = 200
Persons unemployed and actively seeking work = 20
Persons who have quit seeking work due to lack of success = 10
Part-time workers seeking full-time jobs = 30

a) What is the size of the labor force?
b) Calculate the official unemployment rate.
c) Calculate the labor force participation rate.

2. Unemployment Understatement and Overstatement

Discuss the factors that result in the official unemployment rate understating the true level of economic hardship in the labor market. (Graded for Writing)

3. Unemployment Insurance

Comment on the following statement from Chapter 15 in Ehrenberg and Smith.

"Increasing the level of unemployment insurance benefits will prolong the average length of spells of unemployment. Hence, a policy of raising UI benefit levels is not socially desirable." (Graded for writing.)

Answer Key

1. Employment and Unemployment Calculations

a. Labor Force = Employed + Unemployed (actively seeking employment)
= 200 + 20 = 220
b. Unemployment Rate = (Unemployed ÷ Labor Force) x 100 = (20 ÷ 220) x 100 = 9%
c. Labor Force Participation Rate = (Labor Force ÷ Working Age Population) x 100 = (220 ÷ 400) x 100 = 55%

2. Unemployment: Understatement and Overstatement

The official unemployment rate tends to understate unemployment, particularly during long and deep recessions because it does not count several types of unemployment and underemployment which are especially serious during recessions. First, discouraged workers officially drop out of the labor force when they stop "actively seeking employment." This happens increasingly during recessions as workers get discouraged by the lack of success at finding an acceptable new job.

Second, workers involuntarily working part-time because of the inability of finding full-time employment will be counted as fully employed workers by the BLS. Involuntary part-time employment is expected to be more common during recessions as firms cut back on hours for workers.

Third, workers unable to find employment in the field in which they are trained will also be counted as fully employed as long as they have some kind of employment. They are, however, underemployed if they are not able to use their employment skills to their full extent.

3. Unemployment Insurance

There is evidence that unemployment insurance leads to workers extending the length of their unemployment spell, and, possibly, also intentionally choosing to be unemployed for spells simply to receive unemployment insurance, this does not necessarily lead to labor market inefficiency. It does lead to inefficiency if these workers are simply using
the time to delay job search and take additional paid leisure. This is because these workers could be producing wealth for society if employed. If unemployment insurance is allowing workers the additional time to find employment more suited to their employment skills, however, then unemployment insurance may actually be leading to greater labor market efficiency, since these workers will be more productive when they find the more suitable employment.

Finally, Unemployment and the way it is paid and effects welfare was considered throughtout the Welfare Reform act of 1996.

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Will the job market ever get better?

U.S employers still aren't hiring. The labor market is now in its longest slump since WW II.
July 3, 2003: 9:54 AM EDT
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Two years ago, the U.S. economy was just entering its third -- and probably last -- quarter of recession, and the unemployment rate was just beginning to climb.
Two years later, the jobless rate is still climbing.
In fact, U.S. unemployment rose to its worst level in nine years in June as businesses cut thousands of jobs, the government said Thursday.
Unemployment rose to 6.4 percent from 6.1 percent in May. That's the highest level since April 1994. Economists on average had expected a jobless rate of 6.2 percent, according to a Reuters poll.
In addition, non-farm payrolls fell by 30,000 jobs for the month, the report said, after losing a revised 70,000 jobs in May.
Payrolls have fallen year-over-year for 23 straight months, according to Labor Department data, extending the worst stretch for the labor market since World War II.
Usually, by this point in the recession-recovery cycle, the jobless rate should be on its way back down. The last time it rose two years after the last quarter of a recession was in 1982, when the economy was just climbing out of a deep, prolonged slump.

More}
http://money.cnn.com/2003/07/02/news/economy/jobs_walkup/index.htm

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au, The economic picture for the whole world does not look promising. There isn't enough consumer spending to bring it forward to a recovery mode, and by the looks of things, that's not going to happen any time soon - even after the tax cuts start to trickle in some more money to consumers this month. It will not be enough to do much for a ten trillion dollar economy. I look forward to more hard times with the stock market played like a yo-yo by speculators - both private and institutions. The only people that are going to be feeling good during the next few years are those with stable jobs. c.i.

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The phone rang right in the middle of an interesting report on NPR news this afternoon so I missed a key part of it. They were talking about the decline of the new construction market, particularly the market for new office and other commercial buildings -- nationwide. Exception: (and this is where the phone rang), Washington DC where, what with new stuff happening in the federal government, there's still building going on. Isn't this the conservative's worst nightmare -- ever-expanding Washington? Did anyone else hear this report?

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C.I.
That which worries me most of all and it has for several years now is the fact that jobs are disappearing from the US so fast you can feel the breeze as they fly by. Where and on what will the workers of this nation find jobs and industries to work in. Due in part to globalization inorder to retain industries in this nation we will have to lower wages to the level of our competitors or they will have to raise wages to our level. Poof that was the sound of our standard of living going down the drain.

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That's deflation au in its rawest form - price of goods and services have to go down also!

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You've got it, Au. Let's put Bush to one side for the moment (preferably permanently!) and talk about the sheer economics of the problem: what could turn this around?

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Tartarin.
To begin with Bush is not the cause of this problem it has been creeping up on us for the last 40 years. Unfortunately IMO it is fast reaching critical stage. What can be done to stop the steamroller at this late stage? I have no idea?

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BillW - The data you offered in no way disputes my statements, and forgive me if I don't accept your unsupported word that the welfare reform act changed federal unemployment policies. It's as if you cast about for proof of something, but could only find "proof" that the way we measure unemployment is not accurate--a point with which I agree--and then stopped at that. If you are so well versed on welfare reform, you should have no trouble proving that point. (It's the one you actually need to prove here.)

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Bush shares the blame, Au, in the real world -- the world in which your either part of the problem or part of the solution.

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$318 Billion Deal Is Set in Congress for Cutting Taxes

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