Unemployment – It’s How You Measure It!
By Shlomo Maital
Writing in the Los Angeles Times, my friend Clyde Prestowitz, formerly senior trade policy advisor to President Reagan, explains the mystery of unemployment rates – if the U.S. job market is so bad, why is the unemployment rate so low? (6.7 per cent)?
Here is the answer, according to Clyde:
“ Although the Federal Reserve Bank says we’re in the midst of a recovery, and the official unemployment rate has fallen below 7%, the economy is far from being out of the woods. That official rate – technically known as U-3 – doesn’t begin to tell the real story. It is only one of six unemployment measures kept by the U.S. government and counts all those who say they are unemployed and looking for work.
But it does not include those discouraged unemployed workers who have given up looking for a job or those who would like to work full time but are only able to find part-time work. The rate that includes all those people – U-6 – is about 13%. Granted, that is below the 17% of 2010, but it is still far above the 8% of 2007, as we navigate what is being called a recovery – albeit an abnormally slow one.”
Americans who have a job, the fortunate ones, but fear they could lose it, and those who lack a job, and are seeking one or who have given up [discouraged workers], should be defined as “unemployed or at risk of unemployment”. THAT rate is over 50 per cent. And that is the relevant measure, and it is not included in U1 through U6.
U.S. President Barack Obama has just given his State of the Union address. He mentioned the job problem, but gave no specifics. This should become his top priority. It’s a tough nut to crack. Companies like Facebook, with a stock market cap of some $160 b., generate relatively little employment. Companies like Apple create jobs in China. Small businesses face impossible competition from shopping centers and chain stories like Wal-Mart. So, President Obama, start with the SME’s, small and medium-size enterprises. Help them a bit. Nothing could help create jobs more. And silence the big lobbyists, who drown out the weak voices of those SME’s.