11 ms·

It's actually an open mystery why unemployment is so low, but we have yet to see much upward pressure on wages. Theories I've read (probably in the Economist, d

It's actually an open mystery why unemployment is so low, but we have yet to see much upward pressure on wages. Theories I've read (probably in the Economist, definitely at the NYTimes) is there is still hidden slack in the labor market from people who dropped out during the recession, and are gradually rejoining as the economy grows. The link between supply and demand -- and prices/wages -- is really messy, though. I mean, downward nominal wage rigidity is a big deal (and is well documented). The labor market is nowhere near efficient. So no, the UI rate is not some fake statistic, cooked up by government agencies... it's just a noisy statistic for a messy market, whose relationship to 'price' (wages) is nonlinear, laggy, etc. (I think.)

pcrh 9y ago
The same phenomenon exists in the UK. That is, an apparent disconnect between wages, GDP growth and employment, resulting in lower productivity metrics for the economy as a whole.
- walshemj 9y ago
  that's the growth of "so called" self employment low paid mc jobs
ianai 9y ago
I wouldn't call it noisy. Noisy implies it's inaccuracy tends to be positive and negative. You can have a noisy signal that's not biased. But there's a clear downward bias to the unemployment number. My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report. Another factor is to consider inflation. Truly low income will be associated with increased inflation. I would argue going from 1% to 2% is not a sizable increase. http://www.tradingeconomics.com/united-states/inflation-cpi http://www.tradingeconomics.com/united-states/inflation-cpi
- TheCoelacanth 9y ago
  > For every person counted there's at least one wishing for work but given up enough to not report. Isn't that essentially what U6 tries to measure? It indeed tends to be fairly close to double the headline U3 unemployment rate most of the time. It is highly correlated to U3, though, so as long as you are looking at U3 in terms of changes instead of in terms of the absolute number, U6 doesn't add much to the picture.
- dragonwriter 9y ago
  > My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report. Why are you using a simplistic heuristic that assumes a constant relationship between the headline unemployment figure and other measures when the other measures are measured and published alongside the headline figure? (The measure you seem to prefer, unemployed plus discouraged workers as a share of labor force plus discouraged workers, is published as U4; headline unemployment is U3.) https://www.bls.gov/news.release/empsit.t15.htm https://www.bls.gov/news.release/empsit.t15.htm
  - ianai 9y ago
    It was a last post before bed time.
rectang 9y ago
My pet theory is based on evolution: A harsh competitive environment forces commercial entities to develop ever more effective means of extracting value from their workforce, while labor fails to adapt in response because its corresponding entities (chiefly labor unions) are not subject to the same harsh competitive pressures. Eventually you have an accumulation of durable local wage minimums which in the aggregate appear as a global decrease.
walshemj 9y ago
And governments tend to fiddle the unemployment rate to make it look better than it really is

pcrh 9y ago

The same phenomenon exists in the UK. That is, an apparent disconnect between wages, GDP growth and employment, resulting in lower productivity metrics for the economy as a whole.

walshemj 9y ago
that's the growth of "so called" self employment low paid mc jobs

ianai 9y ago

I wouldn't call it noisy. Noisy implies it's inaccuracy tends to be positive and negative. You can have a noisy signal that's not biased. But there's a clear downward bias to the unemployment number. My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report. Another factor is to consider inflation. Truly low income will be associated with increased inflation. I would argue going from 1% to 2% is not a sizable increase. http://www.tradingeconomics.com/united-states/inflation-cpi http://www.tradingeconomics.com/united-states/inflation-cpi

TheCoelacanth 9y ago
> For every person counted there's at least one wishing for work but given up enough to not report. Isn't that essentially what U6 tries to measure? It indeed tends to be fairly close to double the headline U3 unemployment rate most of the time. It is highly correlated to U3, though, so as long as you are looking at U3 in terms of changes instead of in terms of the absolute number, U6 doesn't add much to the picture.
dragonwriter 9y ago
> My little heuristic is to double the number. For every person counted there's at least one wishing for work but given up enough to not report. Why are you using a simplistic heuristic that assumes a constant relationship between the headline unemployment figure and other measures when the other measures are measured and published alongside the headline figure? (The measure you seem to prefer, unemployed plus discouraged workers as a share of labor force plus discouraged workers, is published as U4; headline unemployment is U3.) https://www.bls.gov/news.release/empsit.t15.htm https://www.bls.gov/news.release/empsit.t15.htm
- ianai 9y ago
  It was a last post before bed time.

rectang 9y ago

My pet theory is based on evolution: A harsh competitive environment forces commercial entities to develop ever more effective means of extracting value from their workforce, while labor fails to adapt in response because its corresponding entities (chiefly labor unions) are not subject to the same harsh competitive pressures. Eventually you have an accumulation of durable local wage minimums which in the aggregate appear as a global decrease.

walshemj 9y ago

And governments tend to fiddle the unemployment rate to make it look better than it really is