Are You Unemployed? The Government Might Not Think So

So if you read articles about the US economy, you might seem them reporting a 7.2% unemployment rate. Now this sounds bad, but it's not as bad as it could be. After all, unemployment during the Great Depression was close to 25%. So we're nowhere near to being in a depression.

Or are we?

First, take a look at this table of unemployment rates for the Great Depression:

Year Unemployment rate
1923-29 3.3%
1930 8.9%
1931 15.9%
1932 23.6%
1933 24.9%
1934 21.7%
1935 20.1%
1936 17.0%
1937 14.3%
1938 19.0%
1939 17.2%
1940 14.6%
1941 9.9%
1942 4.7%

As you can see, we didn't start pushing 25% until 1933. The stock market crash of October 29, 1929 is when many people view the Great Depression as starting. Then, our unemployment was just over 3%, but soared to almost 9% the following year and almost 16% the year after that. With out unemployment at 7.2%, we're don't seem to be doing too bad, but unfortunately your government is lying to you.

Take a look at the official unemployment rates for the US for the last four months of 2008. Without going into too much detail about all of the different types (explanations on the page linked to), "U-3" is what the newspapers tell you. "U-6" is the actual unemployment rate and it's much closer to how it was calculated during the Great Depression.


So while the newspapers are telling you we have 7.2% unemployment, it's actually closer to twice that. Why? There are some categories of unemployed which aren't counted. For example, have you given up looking for work because you can't find any? Congratulations! You're no longer unemployed. Have you lost your high-paying job and are delivering newspapers? Congratulations! You're now fully employed and the government can pretend that you're doing fine.

Apparently, determining which unemployed people are unemployed is a serious business and in 1995, the Bureau of Labor Statistics published a comprehensive redefinition of unemployment (PDF). Apparently, their original U-1 through U-7 classifications were too confusing to the public, but U-1 through U-6 are just right.

So are we screwed? Are we heading into another Depression? Maybe not. Back in the 1930s, the idea of government assistance for the economy was unheard of and it was believed that it would sort itself out. It was the Franklin D. Roosevelt administration, elected in 1933 (after Herbert Hoover was kicked out on his ass for pretending that the market will solve all) which aggressively sought to provide direct economic assistance from the government. Curiously, it was after this assistance was offered that the Great Depression started easing, though it was almost a decade before things were really sorted out (and then we had WW II. God has a sense of humor, eh?).

Regrettably, I'm hearing many Republicans today claim that the New Deal didn't have any benefits for the economy, a stance that most economists laugh at. Only time will tell what Obama's policies will do, but by aggressively intervening early, we may rack up a lot of debt but buy ourselves some time to pay it off. However, if we wait to long, our 13.5% unemployment rate may well top 20% and grow worse. I expect the fighting in Washington is going to hurt us all.

  • Current Mood: worried worried
I was unaware of the different employment categories. It always bugged me when, as you say, someone with a great skill set was sent to, say delivering wine for a living and it was considered employment. When your student loan bills make up 1/2 of your income, are you really considered employed?

I had no idea about the sheer suckitude of the thirties as well. Man, that was bloody harsh. And the investment in the military-industrial complex/WWII that government (reluctantly) got involved in made up a larger portion of our (much smaller) economy. So now, that sort of investment needs to have thicker strings attached and be broader.

This is one of those defining moments of a generation. It is hard for me to think that I may be following in my grandparents' footsteps. The difference is, people keep ignoring the peak oil impacts/implications. Cheap energy has helped us to get out of things in the past, but we can't rely on that any longer. If we don't change, drastically, by the time I'm 60, I suspect there will be a big die-off in the industrialised nations; the poor nations will continue struggling as they have, but things will equalise. Without a real investment in sustainability and sustainable energy, we won't have any energy left to work with and will have to do a lot of manual labour that is, frankly, impossible to complete some of the engineering feats that we currently benefit from.

Oh, and what do you care? You've jumped ship. You may have to throw me a lifesaver soon... we're seriously considering getting out of here, despite our wonderful community. How's the UK faring?

Edited at 2009-01-27 11:05 pm (UTC)
Yeah, Portland is really wonderful. That I can understand. If it weren't in the US, I'd be back there now :/

As for the UK, it's still treating me really well. The main thing that people should remember is that if you're here for more than five years and get citizenship, you can live and work just about anywhere in the EU. Want France? You've got it. Fancy a stay in East Berlin (where the house prices are really cheap right now)? Done. Want a siesta in Spain? It's yours. You just have to pay the price of admission and Europe is your oyster.
though it was almost a decade before things were really sorted out (and then we had WW II. God has a sense of humor, eh?

Not really - it was 1941 that the US unofficially entered the war, providing vast amounts of materials to the UK under the Lend Lease scheme, thus creating employment. Then in 1942 you guys *really* entered the war, taking loads of people into employment in the military as well as stimulating demand for production of everything that an army needs.

Provided that you have an economy capable of generating a surplus and aren't isolationist, foreign wars are generally good for it. Wars only fuck your economy over if you can't generate a surplus anyway, or if your means of production come under attack.
Is Perl in recession too? Funny how Lisp usage dropped the least... maybe that's because no one uses it. Everyone at my new place is a PHP-y person. That makes me the most experienced Perl person... how scary.

There’s another factor. There are now many freelancers and other people working contracts who earn their keep without being “gainfully employed.” Those won’t really show up on any of these charts, but their incomes will be no less affected by the economy than anyone else’s.