August 29, 2012

Trends in Unemployment versus Discouraged, Marginally attached and Underemployment

Normally when people talk about the unemployment rate they are discussing the officially reported unemployment figure.   For example the latest figure for July 2012 was 8.3%.    Once in a while someone will say something along the lines that if you include discouraged or unemployed workers then the "REAL" unemployment rate is much higher.      The government does track alternate measures of unemployment that include other groups.  In addition to the normal unemployed there are also discouraged workers, workers who are marginally attached to the workforce, and people who are working part time cause thats all they can find.   

Its not as if these groups didn't exist before we hit the recession.   And I don't recall people talking about the alternate measures back in '07 when unemployment was low.   Of course I'm not saying that the alternate measures are meaningless or that they should be ignored.   But they are just different ways to look at individuals who are either not working for various reasons or who are not working much.   In good times and bad there are always going to be a certain % of the population that falls into these various groups for varying reasons.   Generally speaking they each get larger during bad economy and shrink when the economy is doing well.

The BLS site has historical lookup for the Table A-15. Alternative measures of labor underutilization
There we can find the official unemployment figure as well as the totals including discouraged workers, marginally attached workers and the underemployed.  

U-3 : Official unemployment rate.   This is the normal number we hear reported.
U-4 : Unemployed + Discouraged
U-5 : Unemployed + Discouraged + Marginally attached
U-6 : Unemployed + Discouraged + Marginally attached + Underemployed (part time for economic reasons)

The different groups are described as : "Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule."

For July 2012 the numbers are :
U3 = 8.3%, U4 = 8.8%,  U5 = 9.7%, U6 = 15.0%

Therefore the individual groups would be :

Unemployed = 8.3%
Discouraged = 0.5%
Marginally attached = 0.9%
Underemployed = 5.3%

So there are quite a few people who are considered discouraged, marginally attached or underemployed in addition to the people who are in the normal unemployed category.

I'm going to look at the unadjusted numbers for a few years and pick out the annual rates.   I'll subtract the different groups to see how much of the labor force each of them represents.

Here's the data :

unemployed discouraged marginal under employed SUM
2002 5.8% 0.2% 0.7% 2.9% 9.6%
2003 6.0% 0.3% 0.7% 3.1% 10.1%
2004 5.5% 0.3% 0.7% 3.1% 9.6%
2005 5.1% 0.3% 0.7% 2.8% 8.9%
2006 4.6% 0.3% 0.6% 2.7% 8.2%
2007 4.6% 0.3% 0.6% 2.8% 8.3%
2008 5.8% 0.3% 0.7% 3.7% 10.5%
2009 9.3% 0.4% 0.8% 5.7% 16.2%
2010 9.6% 0.7% 0.8% 5.6% 16.7%
2011 8.9% 0.6% 0.9% 5.5% 15.9%

And here's a picture version :

OK, so as you can see the different groups go up together.    When the job market gets bad all of them grow a bit.   In fact the normal unemployment and alternate unemployment figures are roughly proportional to one another.   Consider the difference from 2006 and 2011.  In 2006 the numbers were all very low but then by 2011 they were all quite high.   If we look at how much each group increased from 2006 to 2011 we get :

Change '06 to '11
Unemployed 48%
Discouraged 50%
Marginal 33%
Underemployed 51%

So you can see they grew about the same rate mostly with the exception of the marginally attached group. 

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