Opinion

Felix Salmon

Unemployment datapoint of the day

By Felix Salmon
June 5, 2009

Remember the stress tests? The baseline scenario had unemployment in 2009 at 8.4%, rising to 8.9% under the more adverse scenario. Well, we’re only up to May, and already it’s at 9.4%.

stress-test.jpg
Bloomberg tries to find a silver lining to today’s gut-wrenchingly atrocious unemployment figure:

The jobless rate increased to 9.4 percent, the highest since 1983, in part as more people joined the labor force to look for work.

Hey! People are out there looking for jobs! That must be a sign of optimism, right? Er, not really. It just means that households are getting desperate. Yes, the headline payrolls figure has a positive second derivative. But there’s nothing to get cheered about in this jobs report.
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Posted by Paul P. | Report as abusive
 

Felix doesn’t like the stress tests and so, somehow, he ends up reading the unemployment data through that lens (guess what, Felix, the projections for the Stress Tests were out of line when they were doing the Stress Tests). Even though its connection to the current news is tenuous.

Did you read the article? Every quote in the article said that the labor market is in terrible shape, but declining job losses are a good sign that the recession might be “abating,” not over… Seemed cautiously optimistic rather than “absolutely” optimistic.

 

I lose track of how many ways one can slice up these numbers but the rate for men is worse: 9.8%. This has meaning in a bunch of ways: heads of household unemployed, nature of job loss by industry type, etc.

Posted by jonathan | Report as abusive
 

It’s bad. However, I would think the stress test is an annual average number which ytd is 8.5%. If it holds steady for the rest of the year at 9.4 you end up at 9.0% 2009 simple average. Are the stress test numbers really that out of line?

Posted by cg | Report as abusive
 

Change in unemployment vs. time has had a positive second derivative for a while now. You probably mean that it has a positive first derivative.

Posted by Phil | Report as abusive
 

WHile I agree with Felix, this is pointless since the unemployment numbers are skewed by not including categories of the unemployed that were counted prior to the Clinton Administration’s changes. If unemployment was counted as it was prior to those changes, it would be at around 19%–the best FDR was able to lower it to during the GD. Conditions are worse than any time since the GD by far and further decline are in forecast.

Posted by advocatusdiaboli13 | Report as abusive
 

Felix – cg’s comment is dead on. I am surprised you made such a simple avoidable mistake.

Currently the average of the first 5 months is 8.5 — spot on with the “optimistic” scenario. If the unemployment rate stabilizes below 9.5 but above 9 the rest of the year, the avg will end up somewhere between 8.5 and 9. Definitely in the stress test’s range.

Posted by kman | Report as abusive
 

OK Calculated Risk looks at the data quarterly and finds the average per quarter exceeds the adverse scenario in the first two quarters of 09. That partly verifies Felix’s argument (and partly invalidates mine) but still, Felix, you know better than comparing an average to a single data point.

Posted by kman | Report as abusive
 

also — while the unemployment numbers are interesting from the stress test point of view, unemployment numbers are a second-order assumption. what is really important is the loss rates. these are related to unemployment but unemployment is not the whole story.

Posted by q | Report as abusive
 

advocatusdiaboli13: the shadowstats dot com guys put real, pre-Clinton including “discouraged workers” unemployment at a bit over 20% right now.

However I don’t think your specific point is valid, in that these “stress tests” were set up assuming the methods of the current statistics. So as long as the tests aren’t also based on models that use old statistics without the necessary corrections….

Posted by Harold | Report as abusive
 

Thanks for your article. I have been unemployed for exactly two months now and have started a website to gather articles on unemployment and provide a forum for others to discuss their experiences. Working on this project has helped me work through my own unemployment situation. I am hoping others will share their unemployment experience on the forum at http://www.suddenlyunemployed.com/forums

 

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