The weight of unemployment

By Felix Salmon
September 4, 2009

The number jumping out at me from this morning’s employment report is 6.9 million: the total decline in employed people since December 2007. The macroeconomic effects of that kind of change are huge: if each person ends up spending $20,000 less a year on average, that adds up to $138 billion in lost economic activity.

Over 10% of US males, and over 15% of US blacks, are now unemployed — and those are percentages of people who aren’t so demoralized that they’ve simply stopped looking for work altogether. Then there’s the “marginally attached” — here’s the Labor Department’s press release on the official “discouraged workers”.

About 2.3 million persons were marginally attached to the labor force in August, reflecting an increase of 630,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, the number of discouraged workers in August (758,000) has nearly doubled over the past 12 months. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.

The U6 measure of broad underemployment spiked up from 16.3% to 16.8% — yet another all-time high. I’m well aware that these figures are a lagging indicator, but the absolute levels alone should be more than enough to depress anybody looking for any sign that the US economy is looking remotely healthy. Markets, of course, are still high, and can always go higher. But the fundamentals look much less pretty.


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The one that jumps out at me is the July upward revision adding 29k on to the previous number. When was the last time their guesses were revised downwards? Just sayin’….

Posted by otto | Report as abusive

Unemployment is certainly a lagging indicator in inventory and manufactoring-linked recessions. Is it also a lagging indicator in recessions brought about by financial crisis? It would seem to me that a rising and prolonged unemployment would cause more foreclosures, thereby causing more problems for the banks and creating less opportunities for new construction and housing starts.

Instead of a lagging indicator, could this be an indication of more problems to come?

“When was the last time their guesses were revised downwards? Just sayin’….”

The last time their guesses were revised downward was in July (when the May numbers were revised downward), a whole two months ago. So what are you just sayin’?

Posted by W. Ellis | Report as abusive

Those are some scary numbers. A good reflection of how socially irresponsible we Americans are.

Perhaps we disenfranchised workers should gather in Washington to express our displeasure with the devotion politicians have for lobbyists and special interests. Seems like a lot of people have to suffer so that a few egos can be massaged.

Posted by RH Pyle | Report as abusive

I’m not sure why you felt compelled to give the black unemployment rate, Felix.

Posted by Mike | Report as abusive

there’s two different issues here: the first is the state of the economy.

the second is the likely present value of the future earnings stream of publicly traded stocks.

the first remains sucky.

the second looks much better.



two different but related things.

Posted by howard | Report as abusive

I like to think these unemployment figures are like the sub you see in the movies heading down to the bottom. . .the rate of descent has been slowed and we are about o land on the bottom of the sea. . . far, far from the surface and the good times we can find there.

We’ve an idea or two about how to get back up. . but are not certain we’ll make it, before we run out of oxygen (Next year’s elections).

As we near the bottom it is hard to get too excited that we’ve finally stopped going down.

Posted by Don | Report as abusive

“if each person ends up spending $20,000 less a year on average, that adds up to $138 billion in lost economic activity.”

Or 1% of a $14 trillion economy.

“The U6 measure of broad underemployment spiked up from 16.3% to 16.8% — yet another all-time high.”

From what I can see at the BLS U 6 definition changed substantially in 1994 and was only instituted for the first time in 1967. The easily available time series seems to go back only to 1994.

So we’re either at the highest in 42 years or the highest in 15.

No, I don’t say they’re good numbers but “all time high” is a tad hyperbolic, even if strictly true for that statistic.

If we’d been measuring U 6 in 1933 it would have been higher I’d wager (and if we used the modern method in 1982/3 I’d take a wager on it).

@W.Ellis: I love being wrong so much that I do it all the time.

Thanks for the correction, appreciated.

Posted by otto | Report as abusive

Retirementsavior is correct when he writes unemployment is a not a lagging indicator in balance sheet recessions.

Posted by Mark G. | Report as abusive

its amazing how many statistics they have for saying people need jobs kinds of makes me think usually the more red tape and numbers and figures the more BS now the U2 or U6 or all the Us that measures people looking not looking out of a job blah blah would only matter to those that like to tell everyone everything is getting better or worse now i can only speak in my area but all that have been laid off from my factory which was about 15 out of 35 employees two were called back while the stimulus made its way through the system we went back to 5 days a week but guess what the orders for magnet wire has slowed again and here we go with basically half paycheck so in reality your heartbeat on the true statistic is what is happening to you and of the five i knew that where laid off this christmas will be a year they are without steady work oh sidenote in the 20 years this factory has been operating this is the first time layoffs of this magnitude have happened so next time someone says there is a light at the end of the tunnel i know atleast some of my friends will say man i hope i make it to the end

Posted by kameha | Report as abusive

Our economy is so intertwined that its almost a catch 22 we find ourselves in. Consumer spending can’t go up when people are still losing their jobs. While how are companies going to start hiring people if no one is spending any money, or has the money to spend. These stimulus packages are really just band-aids. We need to find a solution, and its going to have to be a slow one to work.

Despite the gains in other areas of the economy, I don’t really think anything can get straightened out until we get employment back on track. It all starts there. I think the current administration is doing all it can do at this point, and a lot of the initiatives seem to be merely for show. They sound good, but have no lasting impact. There are no quick fixes to this thing, its just going to be a slow and gradual thing. It can’t go on forever, can it?

Check out my blog on the unemployment situation at… s-jobless-rate-highest-since83/

The unemployment was caused by outsourcing manufacturing jobs, putting too many workers into the construction trades, plus graduating too many professionals for the jobs available. When you make a mistake you have to go back and put things right. We cannot put these people into green jobs as that market is also limited. We have an unworkable form of government at present, with no real leadership, because ALL of congress and the white house is for sale.

Posted by f belz | Report as abusive

There is are massive structural problems in terms of available skills versus available jobs.

More than 5x as many people major in psychology as in all of the engineering fields combined. If you are a doctor, engineer, accountant, nurse, teacher, skilled IT professional, skilled event planner or auto mechanic or welder you are probably not unemployed. My daughter’s excellent pediatrician has long been unable to find a partner for his practice, and is turning away patients.

During the depression there was really almost no work to be found, even among people willing to do anything at almost any price in any place.

My younger cohort has a deep culture that we should all pursue whatever is ‘true to yourself.’ Maybe as a hobby, but to make a living, dreams must be set aside, as bitter as that can be. It is young people, above all, that are massively unemployed.

Posted by Dan | Report as abusive

The stats are being malipulated just like all the others coming from our government. Make the forecast really bad, so when the #’s come out they can say “we lost 230,000 jobs in August but we expected to lose 275,000, so everything is great!!!”

People we still are losing a quarter million jobs a month! With the stimulus $$$ being spent!!! Things are bad, stop listening to the gov’t propoganda and wake up!!!!

Posted by Dave G | Report as abusive

Just think how bad the unemployment rate would be if we had already enacted card check – the Union Goon Squad Entitlement Act. Just imagine if we had already enacted Obamacare and crushed another third of our economy.

Thank goodness for Obama’s and Harry Reid’s legislative incompetence.

Posted by Guy Thompto | Report as abusive

These numbers do not account for the self employed people like me that is out of work also. It is higher than the numbers tell.

Posted by Vern | Report as abusive

“If you are a doctor, engineer, accountant, nurse, teacher, skilled IT professional, skilled event planner or auto mechanic or welder you are probably not unemployed.”

I don’t know what planet you are living on. My wife is a schoolteacher, and was laid off at the end of last year due to budget cuts. She applied for every even remotely viable position, had a few interviews, and was not hired. She was told that every open position had 80-100 applicants.

I work in IT, and I know literally dozens who are out of work, and several have been for over a year.

I know out of work civil, electrical and mechanical engineers, AND accountants. “Event planners”? Are you kidding me?

You are obviously droning some kind of rote message being fed to you, not reflecting reality.

Posted by MyMy | Report as abusive

I am a member of a sizeable (several hundred) organization. When a call went out within the organization for an entry-level position in film/media production there was an ocean of replies. When a call went out for an entry-level accounting position there was nothing. They are still looking.

Posted by Dan | Report as abusive

MyMy –

Come to the DC area if you can. Things are not ideal here but economy-wise, they are better than elsewhere. With the government spending strongly, it may remain that way.

Math and science teachers remain in demand in many places… that could be just a certification or a few classes away. dws/dn/latestnews/stories/021009dntextea chers.3591755.html

I don’t deny things are hard out there and I’m sorry if I came across as insensitive.

Posted by Dan | Report as abusive

PV of FC flows discount model is one of the most widely used methods to derive stock values but this formula has many outside influences and if it flawless the market would above 14k. Understanding the components in the formula can be instructive when determining it’s validity.
The summation of the cash flows are dependent on countless economic assumptions that influence the numerator (level of earnings) and the denominator (time and interest rates).
Let’s project that interest rates will remain stable and simply focus on earnings which ULTIMATELY is a function of consumer demand. You can rebuild inventory but without a pickup in consumer demand to kick start the cycle it is useless. There is ZERO indication that consumer demand is recovering. Anybody? Initial cost cutting always has more bang for the buck and we’re well beyond the initial cost cutting phase. Realistic projection: Earnings are currently way overvalued.
You argue you don’t need stable or higher earnings to increase the PV of FC flows. No you don’t. You simply need the positive effect of a shrinking denominator ie): falling interest rates that overwhelm the negative effect of falling earnings.
When interest rates are in the upper single or lower double digits that game came be played…time is on the side of the holders of stock certificates. However, interest rates are currently at historic lows which means the affect that time has to work on the PV of FC is short.
TIME for the bulls is running out.
The argument above pales when compared to the greater question of our age and it is this: How long will the citizens of our great country going to continue to give time to the wealth owners and financiers who distort information to avoid a legitimate debate on many fundamental issues. These self appointed drivers of democracy seem to believe that we are nothing but rabble, incapable of making the ‘important’ choices that a thriving democracy demands of its citizenry.
Should the rich be allowed to use the taxpayers money to insure their wealth by bailing out mismanaged financial institutions irregardless of the systemic risk? Should these self appointed decision makers be allowed to continue to misallocate our nations human capital and raw materials? Should these financiers and industrialists continue to pollute without regard to the general public health? Should the citizenry of our country send it’s fellow citizens to fight a war created by the rich and powerful because these self appointed leaders are the only individuals ‘to see the global threats’ to our nation? Should the US citizens continue to forcibly displace freely elected foreign governments based on lies floated through the media?
These are but a few of the questions that challenge fiber of our democracy and the future of our freedom.

Posted by csodak | Report as abusive

When will we all get it? This really isn’t the rocket science that it is made out to be.

We have built an economy in which consumer spending accounts for nearly 70% of total economic activity (at the end of WWII consumer spending accounted for less than 30% of total economic activity). In short, over the years, we have built an economy that relies on leveraged American consumers buying tons of stuff (much of which ends up in landfills in short order). The unsustainability and folly of this model has, in the past two years, come crashing down around us–and the rest of the world that relies upon our madness.

The result: millions of American consumers have gone stark raving sane. They are saving their money. They are comparison shopping. They are learning that the words “need” and “want” have two completely different meanings. They are working their way out of debt, going back to school, talking to their kids around the dinner table, reinventing themselves. The electro-shock therapy of this downturn is working, and the madness seems to be abating.


But do not listen to the pundits and economists and politicians and Wall Steet gurus who urge and pray for a return to the madness–the insane spending for spending’s sake, the borrowing, the wild enthusiasm for the next great pyramid scheme.

We do not need jobs that are based on the constant consumption of stuff. We need jobs that are based on taking care of, enriching, educating, entertaining and serving each other.

This scenario of course is a nightmare for the captains of industry, who really upon our greed and foolish notion that we are all rich people in waiting.

Stay sane. Educate yourself for work of worth. Help your neighbor. We will get through this and be better for it.

Posted by Michael Harrington | Report as abusive

No it is not rocket science…but it is the destiny of our nation and our ‘captains of industry’ are not going to suddenly obsorb Karma.

Posted by csodak | Report as abusive