Tuesday, August 5, 2014

The REAL "real unemployment rate" for July 2014

 - by New Deal democrat

This is a slow week for data.  That being said, there is some worthwhile updated information on labor utilization, the housing market, and wages.  There's actually a lot on wages, but I want to wait for Friday, when 2Q unit labor costs are reported, before writing up that grand tour.

Today, let's update the "real real unemployment rate" for July.  This is my corrective for those commentators who have put together metrics that either assume there is no retiring Baby Boom, or rely upon nearly decade-old estimates.  There's simply no need for doing so, when every month the Census Bureau publishes the seasonally adjusted number of people who have completely stopped looking for work, but would nevertheless like a job now.

The first important thing to note is that, since the US Congress cut off extended unemployment benefits at the end of last year, this number, which had been in significant decline in 2013, has completely stopped and in fact has started to rise again:

This means that the "real real unemployment rate" (red) has declined less than the official U3 unemployment rate (blue) as shown in the graph below:

Since last November, while U3 has declilned by -0.8% from 7.0% to 6.2%, the "real" unemployment rate has only declined -0.5% from 10.3% to 9.8%.  Here's the close-up of that:

 Aside from the thoroughly preventable human tragedy, this has negative multiplier effect on consumer spending, and so is a self-inflicted drag on the economy.  The U6 calculation of underemployed vs. the "real underemployment rate" follows the same trajectory.