Is Despair Deflating Unemployment Numbers?

August 13, 2009

Is despair deflating the unemployment numbers?

Spoiler Alert: The answer is not much.

In my previous post, I talked about how the unemployment for July decreased from 9.5% to 9.4% mainly on the merits of people leaving the labor force altogether. Basically, the number of people employed dropped, but the number of people who are unemployed dropped too (and dropped faster). So… if the unemployed people didn’t move into the “employed” column, where did they go?

Some people have suggested they are giving up in despair. Let me explain:

A person is “unemployed” for the purpose of labor statistics only if they have looked for work in the last four weeks. If they stop looking, they’re simply not in the labor force anymore. So, in theory, if people are at home sobbing uncontrollably because they can’t find a job, they’re not unemployed, they’re just not in the labor force.

Fortunately, I discovered that the Bureau or Labor Statistics has been gathering a very useful statistic for the last 15 years called “Persons Who Currently Want a Job”. This is basically a count of people who have given up looking, but would still like to have a job. I suppose you could call this either the “despair index” or the “laziness index” depending on how cynical you are.

Here’s  a graph of the “Want a Job” number over the last 5 years.

WantAJob5years

So the number of people who wish they had a job but have stopped looking has increased dramatically this year, which is somewhat reducing the unemployment rate.

The number of people who aren’t looking for a job but still want one has increased about 1,000,000 in the last year, representing by far the largest increase in since we started tracking the data.

HOWEVER!

If you look at the unemployment rate with and without the “Wants a Job” crowd, they look pretty much the same. In other words, there’s not really that much hiding in the numbers here. There’s maybe a .3-.4% increase in the unemployment rate that can be attributed to despair. Or at least, attributed to new found despair, since we normally have between 4.5 million and 5.0 million people in this category anyway.

What is really weird is that it looks like a lot of people are just up and leaving the work force, either through retirement or due to going back to school. Only a quarter of the decrease in the work force over the last couple months is attributable to an increase in the “Wants a Job” demographic. Even if you added them back into the labor force… the labor force is STILL decreasing.

So… while there is a case to be made for the “despair thesis” (as I’m now calling it), it looks like we’re also just seeing a good number of people who don’t much care for work anymore, thank you.

11 Responses to “Is Despair Deflating Unemployment Numbers?”

  1. Sharpshooter Says:

    If not for the Federal government going on a hiring frenzy, the numbers would be far worse.

    The private sector has been hemorrhaging jobs, the Feds have hired something like 200,000 not including military.

  2. Fishermage Says:

    Perhaps they are going into the “informal market,” as in working off the books at odd jobs and the like.

    • politicalmath Says:

      I had not thought of that… that’s a distinct possibility. I think I even heard an NPR piece on people who are trading services. Trading rent for property upkeep and whatnot.

      But that would have to be a pretty large number of people to make this kind of dent.


  3. “Here’s a graph of the ‘Want a Job’ group as percentage of the population over the last 5 years.”

    I don’t think you meant to use the word percentage.


  4. People in two income families could also be looking at tax rates and making a logical choice to drop out of the workforce. Some may opt for earlier retirement, as well.

  5. Peter Boddie Says:

    Thanks for your wonderful blog and creative videos!

    Back in April, I included a link to one of your pennies videos which related to a blog article about Obama’s spending cuts for a blog I started called “Pundit Pete”. The blog is a satire. I stopped because no one, including my friends, seemed interested in going to it. But now, looking back, some of it was right on. So I started it up again with a new “guest editorial” about health care reform and the “road to ruin”.

    Anyway, I thought you might like it. I also wanted permission (if you need to do that in the blogosphere) to put a link to your Political Math site.

    Thanks again for your patriotic, but slightly “un-American”, contributions to the debate.

    Peter Boddie
    Littleton, CO

  6. Ken Magalnik Says:

    From a new commenter, thanks for a great blog.

    I wonder would it be possible to graph something along the lines of Employed+Unemployed+People who want a job over the past 10-15 years? You could call that “Potential labor force” and see if/how much it is shrinking. I would expect to see some shrinking due to the baby boomer bubble approaching retirement. I wonder if there is some way to filter for that.

  7. PapaSwamp Says:

    As suggested by fishermage…they went “John Galt”….something I’m seriously considering.


  8. […] little while back, I called “discouraged workers” the “despair numbers” (basically, they say they want a job, but they aren’t looking for […]

  9. ThomasL Says:

    In my very small sample (I really don’t know very many people) I know two people who have lost jobs recently, one dropped out of the labor force all together to stay home with kids, the other found a new job to fill the gap, but is still interviewing elsewhere looking for a better one. I also know of two others that are going (or have gone) back to school.

    So, small sample to be sure, but only one is pursuing the normal “lost job / get new job” path. Everyone else is out of the normal market one way or another. They may work at something part time, but their main focus has shifted to school or family.


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