Tuesday, December 20, 2011

Unemployment rate a false metric

The official Oregon November 2011 unemployment rate is 8.7% falling from 9.1% in October. But: "The decline in November’s rate was likely due in part to a declining labor force, which shrank by 3,100 people.” [Portland unemployment continues slow decline.] Isn't 8.7% a false metric because it doesn't measure those who have given up on finding work?

What is often regurgitated by the media is the Bureau of Labor Statistics' official measurement: "U-3, total unemployed, as a percent of the civilian labor force." But the better statistic is "U6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."

A better measurement of the economy is one that includes those that are working part time but want to be working full time and those that want to work but can't find a job. Carried to its logical conclusion a low unemployment rate could be achieved not by adding more jobs but by more people becoming discouraged.