Some of the birther Jack Welch data challenged folks have been raising the issue of U6 being unchanged versus U3′s 0.3% drop as more “proof” of our national innumeracy cooked books.

First off, there are few people who have been advocating the reportage of U6 longer than I have  — See e.g., this 2008 post: Unemployment Reporting: A Modest Proposal (U3 + U6; (you emailers/commenters who think I need to be “clued into U6,” may I suggest you try that Google search box at the top right? Thanks)

Second, those of you who are interested in the more wonky aspects of Labor data need to understand the differences between what these various under-utilization metrics are actually measuring.

According to the Bureau of Labor Statistics:

BLS, U1-U6

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force

U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force

U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)

U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

Those definitions are straight from the BLS site. Become familiar with these definitions, and you it will become clear that they measure different things.

Now that you understand what these different alternative measures of labor underutilization actually measure, lets see what they look like side by side; the Wonkblog has the perfect chart:

 


Source: Washington Post

 

As you can see, they move together, but not quite in lockstep. Some of them are more volatile than others. But overall, they seem to move more or less in the same direction.

 

Category: Data Analysis, Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “Labor Utilization: U3 versus U6”

  1. Seaton says:

    Excellent! I’ve been looking for a similar chart for a long time. I tire quickly of “truthers” or “birthers” people that can’t wait to to waste my time with similar “it’s a conspiracy!” talk, instead of changing their world view because new facts should influence them. ‘Course that said, I resist change, too…hmm.

  2. Conan says:

    The sad truth is we give Kooks, unfounded conspiracy theories, the Kardasians and Reality TV too much press. Sensationalism can work two ways. The instigator who through the grenade over the fence and the responder who actually gave credence to this fool and threw a greande back with full emotion and indignation.

    So just because you prefer U6 to U3 & yes there are differences and yes you can like one better than the other and yes total employment does matter. Look at the well put together explanation of “Second Look” under Invictis’ post.

    I think the real debate is where are we really?

    Are jobs being created? YES

    Are enough jobs being created? NO we can not even keep up with “new people” entering the work force

    Are quality jobs being created? Some but there is a lot of Part Time and folks taking jobs for less pay than what they earned before.

    Are more Americans working than before the crisis? No the percent of American employed is less.

    So definitely there can be a lot more said that just a sound bite for the U3! or the blathering of of some extreme element of society, Left or Right. Politician or Private citizen. We the people have to stay focused and not let these types of non sense confuse what is really important to us.

  3. rd says:

    If it was easy to fudge the unemployment numbers, W would have arranged to have had the initial large spike in unemployment occur after he left office, not before. That would have helped his legacy tremendously and would have made it much more likely that the Republicans could blame whichever Democratic President took office in Jan 2009 for the economic collapse that occurred in 2008.

    While Obama has been far from my ideal President and has done almost as much as W to undermine the rule of law in the US, it is still pretty clear that he was just a junior senator from Illinois when the economic and financial crisis that had been brewing for a decade erupted.

  4. There you go again. Using logic, graphs and facts to make a point. What next? Inflation is not around the corner?

    (What will we do without saner voices like yours.)

  5. ironman says:

    As best as I can tell, the data is fine and would appear to address an ongoing problem the Census/BLS’ monthly Current Population Survey has had in fully counting (or perhaps accurately weighting) the number of part time workers in recent times, the number of which was adjusted upward by 582,000 in the September report.

    That said, the thing that really stands out about the data adjustment is its timing – normally, in recent years, the household survey data has only been revised/adjusted once a year, coinciding with the January employment situation report. It is pretty unusual to have such a large adjustment made outside that regular schedule.

  6. BITFU Search Engine says:

    Extraordinary claims require extraordinary proof. An Orwellian fabrication of Data-Manipulation in order to rig the election requires more proof than a .3% drop in a volatile time-series.

    Speaking of “walking the walk”, here’s a good blast from the past: http://www.ritholtz.com/blog/2006/09/calling-all-conspiracy-theorists/

    Now, if you are on the Left and the Welch tweets are still bothering these days later…after reassessing your relationship with social media and awakening to the realization that you’ve been visibly shaken—by a f*cking tweet–understand this:

    Actions like Obama-Admin and the defense contractors do not inspire confidence.

    This from the newspaper in a city with a large Lockheed factory—days before the tweet necessitating all paper-bag inhalation:

    http://mdjonline.com/view/full_story/20345720/article-Lockheed-holds-off-on-sending-layoff-notices-before-elections?instance=home_viewed

    Denise Rakestraw, president of machinists union local 709 in Marietta, said she believes the company’s decision not to send out the WARN notices was based on discussions with the Department of Labor.

    “I don’t know for sure whether it is politically motivated or not, but it sure seems that way,” said Rakestraw, whose local represents about 3,500 workers at Lockheed’s plant in Marietta. “The notice is designed for employees to be able to make plans to make a living. If the notice comes with no clear indication as to whether there is going to be layoffs, then the intent of it is lost.”

    The belief that our Government could push levers and pull strings in such a manner as to effect a broad conspiracy requires a certain confidence in our government that I sure as hell don’t possess.

    But that doesn’t mean a belief in these numbers is warranted. Conspiracy or not, this Government, when it’s not criminally incompetent is riddled with corporate cronyism and regulatory capture… it was not above distorting “facts” and sent us into these wars…it peddles 2500 page bills designed so they won’t be read by the people charged with reading them(!)…and engages in maneuvers as cited with Lockheed. It doesn’t take a Birther/Truther tin-foil-hat-wearin’-fool to call bullshit.

    [Interesting that you left out the Left corollary to Birthers...Speaking of Conspiratorial-Whackjobs, does George Washington still blog for TBP?]

  7. you know, from a certain perspective, this is a ‘Masterstroke’..

    forget about the *Fact that these (the “Unemployment”) #’s ‘Blow’..

    the ‘conversation’ is, now, about ‘truthers’/’birthers’, and, other, associated ‘cultists’..

    “Politi-Craft”, like that, is, truly, ‘Priceless’..~

  8. theexpertisin says:

    I think expanding the above graph to include the Clinton and Bush terms would be an interesting comp.

    ~~~

    BR: You seem to have missed the main point . . .

  9. Greg0658 says:

    I’m with others – the data-point that should be more prominent is the ratio of workers/total population

    tho total population should be tweeked:
    - kids in teens & up are IN say fourteen / below OUT
    - not able to do a thing OUT say vegitables & bed ridden
    - the tough one – a person who cares for self* via some stream – no desire to work OUT
    - another tough one – undocumented immigrants here illegally IN

    * self in this definition is not in a government/private retirement program -ie: something else (probably forgetaboutit) IN

  10. MayorQuimby says:

    The issue imo is *what it is costing us* to bring the UE rate down. We have a deadly concotion of excessive deficits, financial repression, weak labor participation, increasing part time work, reduction in benefits and most importantly *hardly any real deleveraging at all*.

    We are essentially trying to get back to 2006 and well…you all know what comes after 2006.

  11. JimRino says:

    First, lets not forget that Republicans are hypocrites who NEVER spoke of U6 while Bush was in office, and didn’t care, what the number was. Along with Not Caring about the Massive Defict Bush built, along with not caring about the growth of the money supply. Remember M3? Bush Built That and then cut off any information about it.

    [ Kick the Retards out of Government ]

    Now, go on with your discussion of U6.

    Thank you.

  12. openwheel11 says:

    Well, JimRino, since you asked and apparently have not heard about this whackty thing called a “search engine”, here is U6 from the bush years:

    http://portalseven.com/employment/unemployment_rate_u6.jsp

    and about those “Massive Deficits”

    http://pjmedia.com/instapundit/wp-content/uploads/2012/10/OBAMAFAILDEFICITSCBO.jpg

    Should Bush have controlled the deficit better? Hell Yes. Has Obama done ANYTHING about it? Hell No.

  13. JimRino says:

    openwheel11, are you throwing softballs for me to hit out of the park?

    Did you even READ Ritholtz’s book?
    There was this little thing called the Real Estate / Stock Market FRAUD Bubble and Recession, caused by Bush/Greenspan/Cheney ignoring FBI warnings that there was rampant fraud in the real estate markets.

    Did you remember that Greenspan allowed a 60 Trillion Dollar CDO market to be created, a dark market, with No Regulation, allowing speculators to place bets, backed by nothing, high leverage bets, by players that if they failed would put the players into bankruptcy, along with all counter-parties?

    Republicans put these people out of work by allowing a market built to fail to be built, that drove the economy into a deep recession. Then they complain about all the people they put on food stamps, and into foreclosure, by their policies.

    You sir, by doing no real research on the issue, are an enabler of Republican Incompetence.

  14. Livermore Shimervore says:

    Obama called:

    “Hey Jack Welch many thanks for screaming from the rooftops that a 0.3′s was UNPOSSIBLE!!!”

    Welch has unwittingly done three things:

    1- changed the subject from debates to economy trending towards the biggest drop in unemployment during an election year going back 50 years

    http://graphics8.nytimes.com/images/2012/10/05/us/politics/fivethirtyeight-1005-uechange/fivethirtyeight-1005-uechange-tmagSF.png

    2- Alerted those who weren’t paying attention and missed the BLS news the first time around.

    3- Made it appear that 0.3′s was a far bigger positive signal than it really was.

  15. socaljoe says:

    I tend to favor the employment to population ratio which looks quite a bit different.

    http://research.stlouisfed.org/fred2/series/EMRATIO/

    On another note… in the spirit of improving this blog, I recommend to automatically delete any comment containing the word “Republican”, “Democrat”, “Clinton”, or “Bush”.

  16. Livermore Shimervore says:

    ^ St.Louis Fed chart would be a lot more interesting if it had a manufacturing as % of GDP curve atop the employment/population trend.

    And even more interesting if it had a third chart showing GDP growth for China 1994-20012.

    Now everyone go buy something made in China while we whine about sluggish job creation and unemployment over 7%.

  17. rd says:

    socaljoe

    The 50s and 60s are known as one of the great US economic growth periods. Yet the emratio cycled up and down in a fairly narrow range during that period and didn’t start a sustained rise until the 1980s. We are only now just getting back down to the highest levels of the 1950s-70s. Meanwhile, disposable income has been flat or negative over the past 30 years while income inequality has increased during which time emratio grew substantially.

    Is the “New Normal” really just a return to household employment statistics from the 1950s and 60s? Are higher employment ratios unsustainable over the long run?

  18. philipat says:

    I think you are missing the point that U-3 and The Household Survey, from which the “Unemployment rate” derives are entirely different surveys, with the latter being much more volaitile. Agreed that U-3 and U-6 generally move in the same direction. SO let’s use U-3 and U-6 and either discontinue or ignore the Household survery, which is what has caused all the discussion. I agree that direct Government manipulation of The Household survey is unlikley but given its volatility and less accurate portrayal of “Under-employment” in comparison to U-6, why bother with all the unnecessary time-wasting discussion it causes, especially letest number which just doesn’t “Feel” right.

  19. philipat says:

    PS. You will also note that there has been a recent divergence between U-3 and U-6 and even more between Household and U-6. The former is significant because of common data, the latter may be almost entirely random.

  20. Baywatcher says:

    I think that taking people who don’t get paid, but respond that they are working, off the unemployment rolls stretches the idea of employment further than it should go.

  21. Swedish Austerity says:

    Traditional Swedish ways of “managing” the unemployment numbers when they became too high were to offer a lot of unemplyed people disability pensionor and permanently remove them from the workforce or to shove the unemployed into meaningless educational programs where the were contained untill the economic downturn was over and the could return to their old jobs.

    Any numbers about how many working age americans are out of the workforce courtesy of the federal government would be greatly appreciated.

  22. rd,

    you went with..”…Is the “New Normal” really just a return to household employment statistics from the 1950s and 60s? Are higher employment ratios unsustainable over the long run?…”

    see some of..

    1st
    http://www.usgovernmentspending.com/total_spending_1950USrs

    +,
    http://www.usgovernmentspending.com/total_spending_1960USbs

    then,

    http://www.usgovernmentspending.com/total_spending_1980USbs

    ultimately,
    http://www.usgovernmentspending.com/total_spending_2010USbs

    Search..
    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus-ns-aaf&v%3Aproject=clusty&query=%25+of+Total+Government+Spending+as+share+of+the+Economy+1950-2012

    Is your Thesis, really, that ‘We’ are comparing ‘like Periods’ (?)

    That, given the Choice (?), Peep would rather be ‘at the Mill’, than ‘at the Hearth’ (??)

    do I understand your Point, correctly?