zondag 7 oktober 2012

More and More Discouraged Workers

This following graph should be concerning. We have government statistics (grey and red chart) and we have the real SGS Shadowstats statistics (blue chart). The key statistic to look at is that of the discouraged worker.

Let's go over the definitions first. A discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment. This is usually because an individual has given up looking or has had no success in finding a job, hence the term "discouraged".

This discouraged worker includes two categories: short-term discouraged (less than 1 year) and long-term discouraged (more than 1 year). The government statistics only show the short-term discouraged workers (U6). Why do you ask? Political considerations, to improve the statistics and this is especially true after year 2009 as we will see below.

Since 1994 Shadowstats has included long-term discouraged workers. Long-term discouraged workers are those people that are out of a job more than 1 year and I don't see a reason why they aren't counted in the statistics.

Official unemployment rate (U3) is 7.8% right now. Unemployment rate including short-term discouraged workers (U6) is 15%. The real unemployment though (SGS), is 23% (Chart 1). This SGS unemployment counts in the long-term discouraged workers upon the U6 number.

Chart 1: SGS Unemployment Rate
Now, what concerns me a lot is that the blue chart has been doing something weird after year 2009. Previously, the blue chart always followed the U3 and U6 unemployment numbers. But since 2009 (after the economic crisis), the blue chart kept going up, while the other red and grey charts are going down. This is a serious deviation. It means that the class of long-term discouraged workers has been massively increasing. It also means that the short-term discouraged workers just can't find a job. That's why they are being added to the long-term discouraged worker category. This only started to happen after 2009. This is also the class of unemployed people that are most unlikely to find a new job due to the length of the unemployed period. The real unemployment rate is now almost on par with the unemployment rate of the Great Depression (25%).

You can be sure of this, the economy isn't doing as well as it seems.

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