U3 and U6 Unemployment during the Great Depression
A frequent meme propounded in the economic blogosphere is that U6 unemployment, running near 17% now, is a truer measure (and there are good reasons to believe it is), so that means we have unemployment already approaching Great Depression levels of 25%. Left out of the comparison is the fact that U3 and U6 measurements didn't exist during the 1930s. So, is the 25% unemployment peak for the Great Depression a fair comparison to U6 unemployment today?
N. Andrews compared historical versions of unemployment statistics with the modern U3 and U6 versions, published as "Historical Unemployment in Relationship to Today" , has an answer. He writes:
For the period of 1900 - 1947 we have two unemployment statistics available, Unemployed Non-Farm employees and Unemployed Civilian Workforce. These two data sets pose a challenge as they were developed during a period of ever-changing data collection methodologies. The data in the sets has been adjusted by the sources listed in Bicentennial Edition: Historical Statistics of the United States, Colonial Times to 1970 in an attempt to sync the data sets with the methodology that was put in place as of 1940 and was the basis for methodologies since. We can compare the two available data sets ... and we see that the Unemployed Non-Farm employees and Unemployed Civilian Workforce measures of unemployment appear to be a close analogue of modern U3 (Unemployed Civilian Workforce) and U6 (Non-Farm employees).
Based on that research, he was able to generate a mathematical formula to calculate U3 and U6 unemployment for the entire period since 1900. He found that at the peak of the Great Depression, U3 was 25.2%. U6 was 37.6%.
Here's the resulting graph:
If Nelson is correct, the notion in the blogosphere that current U6 unemployment levels are close to those of the Great Depression appears to be false, and indeed, far off the mark. Using Nelson's methodology, our currrent U3 and U6 unemployment are both very close to the figures in 1930, which is bad enough. But they are less than half of the unemployment that existed at the peak of the Great Depression.
Are there a lot of people that think UM is close
to the Great Depression. Most of what I've read people are watching them getting closer but not there yet. I for one do rant a bit about how the general public doesn't even know U6 exists and the media doesn't help give out such information.
The great depression didn't have the long term effect of outsourcing jobs. It is something that is still marching forward and taking "green" jobs with it.
nice correction NDD
While this situation is bad, bad data is bad data. Nice exposure to Andrews work. I had wondered about the unemployment stat. methods have been changed repeatedly and how to adjust in order to obtain historic scale.
Although today, where are the "self employed" in these numbers? There are hundreds of thousands of contractors out there who are really temps., but they are counted as small businesses and thus do not go into the unemployment statistics.
Yeah I am one of those 1099 types
and if I fail I am not even a blip on the radar. My two sisters are 1099 people. One sisters husband is a Realtor and he is sitting with no sales basically unemployed but won't show up on any reports. I know many, many small subcontractors that haven't had work in almost a half year.
Robert, you are correct in wondering because we live/work in a different manner than we did at the time of the Great Depression.
tis true
one of us needs to research this out and when I say research, I mean to the level of a NDD post (he really researches out his stats). For this use of 1099-misc. as a way to underpay workers is rampant.
any statistics are
any statistics are apple/orange comparisons, as you are trying to contrast stats that are not comparable in any way..
you are contrasting a period in which the overwhelming majority of goods sold in the usa were manufactured and produced in the usa by americans,
and also a era in which it was quite commonplace for a significant pct. of the population to 'work' off-the-books for cash, and usually for irregularly/seasonal periods.. any 'stats' from this period are virulently questionable and certainly INCOMPLETE, if not outright inaccurate, as by our standards today, a large part of the work force working a procession of travelling labor jobs for cash would not be 'seen' as employed at all.
in the current era, we have been on a multi-decade crusade to denude our nation of its primary economic base, and employment base,
Our 'leaders' reclassify hamburger-making as a ''manufacturing'' job during Bush Admin desperation to paint a false face on the consequences of their economic offshoring,
and none of the above has any precendent or counterpart in the earlier Depression.
We are now also a entirely fiat currency underwritten state, whereas even the poorest WPA laborer had a dollar in his pocket come payday that consisted on what in that era was a dollars-worth of silver, so there was inherent valuation still present in that time, as opposed to govt assurances from a president that rules a debtor state with no hard asset beedrock supporting the markets accepted currency valuations of a pack of scurrilous, mercenary traders..
Curious artifact
One thing that immediately pops out at me regarding Andrews' data (graphs) is that the U3 and U6 plots are identical throughout the entire time period being measured (with U6 only being an expanded version of U3, as if one merely turned up the volume of U3 on an oscilloscope). Look closely, even the smallest of details is mimicked in the U6 data. Are we to believe that the two can be tied so consistently for over so long a time, with never a hint of one lagging or leading the other? I for one would be most interested in the methodology in how these data were actually calculated and finalized, as it appears that only superficial estimates were used to expand and/or fabricate existing numbers; in other words, no new data or data assessment appears to be present.
I believe it
Because U3 is merely the sanitized-for-public-consumption version of U6. The methodology of collecting the data is *exactly* the same, the only difference between U3 and U6 are some pretty constant superficial differences.
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Executive compensation is inversely proportional to morality and ethics.
There are three other
There are three other factors that are being omitted here: percentage of women in the workplace compared from 2009 to 1929-1933, average wage comparison between 2009 and 1929-1933, and cost of living expenses.
Until all of these three factors are successfully enveloped into the equation, it's incredibly difficult to determine just how bad our current economic status is in comparison to the Depression.
Numbers
While it would be great to have the "real" numbers, I think we don't need them to understand the problem as a whole, which is horrible policy. We suck from the teat of our giant economy, thinking we can have bad policies because our economy is so strong to be able to withstand. Now we are forced to see that our policies, both Republican and Democrat, continue to grow our government, increase corruption, and diminish freedom.
Not the same
You have to also remember (or learn) that there are close to, if not over, 100 million people in this country today that do not and never will work and they are not counted as unemployed. It was a completely different culture in the late 20's/early 30's. The attitude then was you either work or you starve. The entitlement programs that have put tens of millions of Americans on easy street simply didn't exist then. Handicapped people didn't live long and productive lives. There was the occasional sanitarium but the huge majority of those not able to care for themselves simply perished.
If you add the entitled never-employable people to our unemployment numbers we are over 60% unemployed.
that's a pretty incredible accusation
and one that is dead wrong. Firstly women were not in the workforce, secondly disabled are somehow "entitled"? Give me a break! How heartless can one be? Then blacks worked, worked like dogs and were also not counted. Entitlement...oh yeah those lazy bums. Merry Christmas to you, glad you have a sense of reality and the phrase, "there but for the grace of God go I".
Easy Street?
Where is this Easy Street? I would hate to have to live on the meager entitlements many of them get. You forgot to mention the large number of retired -- they've got their nerve ignoring the actuarial tables Bismark used. But once people are out of the labor force, it's not an easy thing to get back in. While some are unable to work because of disease or injury, I would hasten to add that work itself is part of the value one gets in life. I would hate to spend my days watching Jerry Springer -- if that's Easy Street, you can have it. But we have a lot of misconceptions about the poor and disabled, and there is a whole literature on the physical and mental health of the poor. You make a valid point that there has been a change in the way we treat the poor and disabled. I've always found it interesting that when Ronald Reagan became president, he stopped talking about the "Welfare Queen." That was about the time David Stockman discovered that ketchup was a vegetable in school lunches.
Frank T.
things to keep in mind
Andrews seems to make the case that since the difference between the Unemployed Non-Farm employees and Unemployed Civilian Workforce measures of unemployment are related by a factor similar to that of modern U3 and U6 then they must be decent analogs. The difference factor between the U4 and U6 data from 1994 to 2010 is 1.68. Why does Andrews not assume that the two historical values are analogs for these modern values? In addition, U6 is not a measure of unemployment. It includes individuals who settle for part time work due to economic reasons. A true measure based on data provided by the Bureau of Labor and Statistics is not possible due to the fact that data about workers who have been discouraged for over a year are not recorded. The BLS data can however be used to compute what is essentially a U5.5. This includes all individuals who are available for and want to work but do not currently have a job. This value showed december unemployment and 13%.
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