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We’re Told the Unemployment Problem is Over; Carl Davidson (KD); Facebook; November 23, 2017.
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Carl Davidson (KD): “WE’RE TOLD THE UNEMPLOYMENT PROBLEM IS OVER. Because it’s at 4%. If it goes below that, the Fed will take measures to get it back up to four, since a ‘too tight’ labor market means wages go up. Can’t have that. In any case, the numbers are cooked by placing whole batches of people ‘outside’ the labor force altogether. Hence the headline on this informative article.”
I agree with KD the “unemployment problem” isn’t over, but we part company after that.
Take KD’s concern for wages with a grain of salt; you can’t credibly claim you want real wages to increase while pushing for open borders. By “real” I mean true increases, not those fueled by inflation, printing money, and so on. We also need to consider overall employee compensation, not only wages.
Re KD’s comment “the numbers are cooked …,” not exactly. Some “cooking” of the numbers is necessary to get meaningful information from the raw data. What good is a rate that divides the number of unemployed for any reason by the entire population? Should retirees not looking for a job count as unemployed? What about children?
Here’s the BLS publication “How the Government Measures Unemployment.”
The primary employment number reported in the monthly “Employment Situation” report includes only those who are unemployed and looking for a job. The unemployed who aren’t looking for a job aren’t counted.
While the unemployment rate is currently low, at least part of that is due to a relatively low “labor force participation rate” (LFPR). According to the BLS, “The labor force participation rate is the percentage of the civilian noninstitutional population 16 years and older that is working or actively looking for work.” A dropping LFPR makes it easier to achieve a lower unemployment rate because it provides a smaller divisor. At 62.7%, the LFPR as of December 2017 was at its lowest since February 1978.
The aforementioned BLS publication doesn’t say why the employment reports exclude farm payroll. As far as I can tell, it was not feasible to get farm payroll data in a timely matter at least as recently as the 1930s. Today, the reason appears to be agricultural payroll is too small to justify the effort. According to “Employment by major industry sector, 2006, 2016, and projected 2026” (Last Modified Date: October 24, 2017), the “Agriculture, forestry, fishing, and hunting” payroll is only about 1.5% of total payroll.
KD wrote, “a ‘too tight’ labor market means wages go up. Can’t have that.” Driving up overall compensation (wages, medical insurance, vacation, etc.) also drives up the cost of the products and/or services sold by a business.
While true 100% employment at the country level sounds like a nice goal, any “ism” with any kind of freedom needs some level of unemployment to avoid gridlock. “What 0% unemployment looks like” (Annalyn Censky; CNN Money; May 15, 2012) does a pretty good job discussing 100% employment.
In Peace, Friendship, Community, Cooperation, and Solidarity. <g>
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