7 ms·

These articles are almost always based off the wonderfully misleading U-3 statistic instead of the U-6. https://www.investopedia.com/articles/investing/080415/

These articles are almost always based off the wonderfully misleading U-3 statistic instead of the U-6. https://www.investopedia.com/articles/investing/080415/true-unemployment-rate-u6-vs-u3.asp https://www.investopedia.com/articles/investing/080415/true-... The U-6 unemployment rate is nearly double that of the U-3 and is currently at 7.4 percent https://www.macrotrends.net/1377/u6-unemployment-rate https://www.macrotrends.net/1377/u6-unemployment-rate There haven't been any major gains to wages since the 80's except for high wage workers, who have seen a nearly 35% increase. Page 4 for table. https://fas.org/sgp/crs/misc/R45090.pdf https://fas.org/sgp/crs/misc/R45090.pdf If the unemployment rate is so low why have we seen so little gain to our wages in the past 40 years? The issues are greater than just faffing about with the unemployment rate but learning to spot this sort of trickery and call it out is important. Here is a great article on Forbes that goes into some of the reasons why this is the case. https://www.forbes.com/sites/teresaghilarducci/2018/07/18/why-wages-wont-rise-when-unemployment-falls/#5a01251a5d9d https://www.forbes.com/sites/teresaghilarducci/2018/07/18/wh...

dalbasal 8y ago
There are plenty of good reasons to use alternative unemployment metrics. The one that's usually used (the "official one") is outdated, and mostly useful for estimating the type of unemployment that impacts running costs of unemployment assistance programs. It isn't the best for telling us how many people are working, or as a general labor market health indicator. That said, it isn't a conspiracy. U6 is probably better as a general indicator. I personally prefer employment/population for each age brackets, fwiw. But... since these correlate, the trend is the same. U6 is always about double u3. Both are lower than they had been. The "structural" threshold for u6 is also double u3.
- mifreewil 8y ago
  Even more interesting is the long-term trend of long-term discouraged workers. This doesn't seem to be recovering anytime soon, if you believe SGS - http://www.shadowstats.com/alternate_data/unemployment-charts http://www.shadowstats.com/alternate_data/unemployment-chart...
  - grandmczeb 8y ago
    The shadowstats metric is an estimate based on "proprietary modeling". In other words, it's made up with no real methodological backing. The people running shadowstats are pushing a political agenda, not doing real economics.
    - mifreewil 8y ago
      > The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers. You can argue the accuracy of the numbers or estimates, but my understanding it is just supposed to take into account long-term discouraged workers, which you can decide whether they matter or not, which are not reflected in official numbers since 1994 according to SGS.
      - grandmczeb 8y ago
        > You can argue the accuracy of the numbers or estimates, but my understanding it is just supposed to take into account long-term discouraged workers Sure, and my estimate (based on very sophisticated modeling I won't give you any details about) is that the number of long-term discouraged workers is exactly 42. Here's the entirety of SGS's stated methodology for their estimate by the way: > The ShadowStats number—a broad unemployment measure more in line with common experience—is my estimate. The approximation of the ShadowStats “long-term discouraged worker” category—those otherwise largely defined out of statistical existence in 1994—reflects proprietary modeling based on a variety of private and public surveying over the last two-plus decades. SGS's estimates don't even pass basic plausibility tests either. For example, in May 2015 the SGS metric was 23%. Using the published U6 for the same month, we can solve for SGS's estimate for the number of long term discouraged workers: 26,114,100. That's 4x the BLS's estimate of people who wanted a job but did not not have one (6,536,000) and 7x the number who wanted a job and had not looked at least once in the last year (3,712,000) for the same time period. What's their model? What "public and private" surveys are they taking into account? What makes up the discrepancy between their estimates and the BLS's numbers? We don't know because SGS doesn't tell us, but I think we can both make an educated guess; their numbers are pulled out of their underwear.
blackhaz 8y ago
But wouldn't comparing U6 to U3 be misleading? U6 has always been a double of U3, more or less. Right now U6 looks like U6 in the late 90s.
- AmericanChopper 8y ago
  If you want to talk about the economy’s ability to generate jobs, then U3 is the best metric. U6 contains everybody who chooses not to look for employment for whatever personal reason, whether they’re discouraged or simply just don’t really need or want a job.
- rtisdale 8y ago
  It's about what each of these statistics measure. As another user mentioned, the U3 is a very narrow definition that is largely useful for measuring the cost of unemployment benefits, it does not give a true idea of the real unemployment rate. This article goes into the differences and their relevance https://www.investopedia.com/articles/investing/080415/true-unemployment-rate-u6-vs-u3.asp https://www.investopedia.com/articles/investing/080415/true-... >The U-3 unemployment rate is a comparatively narrow technical measure that leaves out a whole swath of out-of-work people who are willing and able to take a job but who don't fit the narrow BLS definition of "unemployed." For example, a stonemason who wants to work but who has become discouraged by a lack of opportunity in the midst of a deep economic recession would not be included in U-3 unemployment. A marketing executive who is laid off at age 57 and stops scheduling new job interviews due to her experience of age discrimination would not be included in U-3 unemployment. A person who only works one six-hour shift per week because no full-time jobs are available in his area would not be included in U-3 unemployment.
bjourne 8y ago
No, U-3 is not misleading. See the discussion at https://news.ycombinator.com/item?id=17475481 https://news.ycombinator.com/item?id=17475481 The point of metrics is to make them comparable. Comparing apples to apples, the US unemployment rate is 3.9% vs the EU average at 7.1%. If you want to use U-6 instead, you can make an orange to orange comparison and get 7.4% for the US and roughly 14% for the EU. Given that EU wages have increased much more than US wages we can conclude that unemployment has very little to do with wage increases. And since empirical evidence trumps conjectures, we throw the so called "law" of supply and demand into the garbage bin.
- shawn 8y ago
  And since empirical evidence trumps conjectures, we throw the so called "law" of supply and demand into the garbage bin. Would you mind expanding on this point? It wasn't supported by your other assertions, and I'm curious how such a counterintuitive conclusion might be true.
  - gota 8y ago
    I interpreted it as follows: If unemployment is indeed down (and he asserts that it is) then the supply of extra workers is down also. The salaries, following the supply/demand ratio, should be up. And they are not. Since they're not, the law of supply/demand dictating 'prices' does not work for worker's compensation.
    - bko 8y ago
      What people call "salaries" does not include employer cost of benefits. For instance, US health care spending grew 4.3% in 2016 [0]. Since many employers cover health care in the US, a growth in health care expenditures on the employer side can be seen as a increase in salary. And since health care benefits is a disproportionate amount for low or middle income workers, this will hamper their wage growth the most in relative terms. In other words, if 25% of your "pay" is health care, and health care is growing at 4%, your effective "salary" can be said to be growing at 1% as long as your premiums and coverage stay the same. [0] https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...
syshero 8y ago
U-6 is following similar trend as other Unemployment indicators. It was relatively high in the last decade. What is your point? It is relatively high but falling.
neffy 8y ago
Exactly. The other gotcha with US unemployment is that you need to add about 2% to compensate for the incredibly large number of people stuck in prisons, compared to other countries. Approximately 0.7% of the population is behind bars, and most of them are working age.
- notfromhere 8y ago
  theyre not unemployed because theyre not in the workforce
  - turtlecloud 8y ago
    Well they should be counted. How many had to resort to crime because of no employment opportunities? That’s the real question and I would surmise that there is a percent greater than 0 that would not have stolen or robbed a bank if they had the given job opportunity. I have heard a bunch of people going into credit card stealing because it pays more than min wage.
bradleyjg 8y ago
> There haven't been any major gains to wages since the 80's except for high wage workers, who have seen a nearly 35% increase. Chart employment costs in addition. Notice the huge divergence between the growth in what employers are paying and what employees are getting in wages. Figure out where that money is going and you’ll have the real answer. Though you may not like it.
- sillypuddy 8y ago
  Link, or way to do that?
  - dmoy 8y ago
    Well for one just look at the 5-7% annual increase in employer healthcare costs for the last couple decades, and despair :/. It's like 3-4x as expensive as it was 20 years ago for employers to offer health insurance.
    - RodericDay 8y ago
      Just because someone pays more for insurance doesn't mean they're getting more health care.
    - vkou 8y ago
      And yet, employers prefer the employer-provided health insurance model, because it increases the friction of switching/quitting jobs.
      - 2bitmachine 8y ago
        Exactly. Whether it’s H1B abuse or tying work to healthcare, employers don’t want to compete for labor. When the Chamber of Commerce supports a socialized healthcare system, I’ll believe otherwise.
      - chimeracoder 8y ago
        > And yet, employers prefer the employer-provided health insurance model, because it increases the friction of switching/quitting jobs. Where do people get this idea from? No, employers do not prefer the employer-provided model. Especially at scale (employers with more than about 1000 employees), it's dramatically more expensive for them than it would be if they didn't have to operate health plans themselves, and instead could pay employees more to purchase comparable health insurance independently. However, employers aren't the culprit, because they can't change that part of the system. The only choice an employer can make is what kind of health insurance to offer. There's one backdoor - employers can offer a cafeteria plan, which is what a few employers (like Netflix) do, but in most states, there simply are no good plans (at any price) for health insurance that are comparable to what an employer can provide, so this option is rarely used.
nabla9 8y ago
> There haven't been any major gains to wages How about unit labor cost? unit labor cost is the ratio of total labor compensation per hour worked to output per hour worked (labor productivity).
mdorazio 8y ago
My issue with U-3 isn't that it's misleading in the statistical sense, but that it says absolutely nothing about the quality of jobs that people have. If every software engineer on HN was fired tomorrow and given a minimum wage job at McDonald's, U-3 would be exactly the same. It's not really a meaningful statistic anymore when talking about actual economic health of workers unless you pair it with several other metrics. What I'd like to see is a metric of Quality Jobs that we can compare over time. Something like % of people working at least 35 hours a week at a single job that provides basic benefits and a living wage in the local market for a single worker.
- deleted 8y ago
  [deleted]

dalbasal 8y ago

There are plenty of good reasons to use alternative unemployment metrics. The one that's usually used (the "official one") is outdated, and mostly useful for estimating the type of unemployment that impacts running costs of unemployment assistance programs. It isn't the best for telling us how many people are working, or as a general labor market health indicator. That said, it isn't a conspiracy. U6 is probably better as a general indicator. I personally prefer employment/population for each age brackets, fwiw. But... since these correlate, the trend is the same. U6 is always about double u3. Both are lower than they had been. The "structural" threshold for u6 is also double u3.

mifreewil 8y ago
Even more interesting is the long-term trend of long-term discouraged workers. This doesn't seem to be recovering anytime soon, if you believe SGS - http://www.shadowstats.com/alternate_data/unemployment-charts http://www.shadowstats.com/alternate_data/unemployment-chart...
- grandmczeb 8y ago
  The shadowstats metric is an estimate based on "proprietary modeling". In other words, it's made up with no real methodological backing. The people running shadowstats are pushing a political agenda, not doing real economics.
  - mifreewil 8y ago
    > The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers. You can argue the accuracy of the numbers or estimates, but my understanding it is just supposed to take into account long-term discouraged workers, which you can decide whether they matter or not, which are not reflected in official numbers since 1994 according to SGS.
    - grandmczeb 8y ago
      > You can argue the accuracy of the numbers or estimates, but my understanding it is just supposed to take into account long-term discouraged workers Sure, and my estimate (based on very sophisticated modeling I won't give you any details about) is that the number of long-term discouraged workers is exactly 42. Here's the entirety of SGS's stated methodology for their estimate by the way: > The ShadowStats number—a broad unemployment measure more in line with common experience—is my estimate. The approximation of the ShadowStats “long-term discouraged worker” category—those otherwise largely defined out of statistical existence in 1994—reflects proprietary modeling based on a variety of private and public surveying over the last two-plus decades. SGS's estimates don't even pass basic plausibility tests either. For example, in May 2015 the SGS metric was 23%. Using the published U6 for the same month, we can solve for SGS's estimate for the number of long term discouraged workers: 26,114,100. That's 4x the BLS's estimate of people who wanted a job but did not not have one (6,536,000) and 7x the number who wanted a job and had not looked at least once in the last year (3,712,000) for the same time period. What's their model? What "public and private" surveys are they taking into account? What makes up the discrepancy between their estimates and the BLS's numbers? We don't know because SGS doesn't tell us, but I think we can both make an educated guess; their numbers are pulled out of their underwear.

blackhaz 8y ago

But wouldn't comparing U6 to U3 be misleading? U6 has always been a double of U3, more or less. Right now U6 looks like U6 in the late 90s.

AmericanChopper 8y ago
If you want to talk about the economy’s ability to generate jobs, then U3 is the best metric. U6 contains everybody who chooses not to look for employment for whatever personal reason, whether they’re discouraged or simply just don’t really need or want a job.
rtisdale 8y ago
It's about what each of these statistics measure. As another user mentioned, the U3 is a very narrow definition that is largely useful for measuring the cost of unemployment benefits, it does not give a true idea of the real unemployment rate. This article goes into the differences and their relevance https://www.investopedia.com/articles/investing/080415/true-unemployment-rate-u6-vs-u3.asp https://www.investopedia.com/articles/investing/080415/true-... >The U-3 unemployment rate is a comparatively narrow technical measure that leaves out a whole swath of out-of-work people who are willing and able to take a job but who don't fit the narrow BLS definition of "unemployed." For example, a stonemason who wants to work but who has become discouraged by a lack of opportunity in the midst of a deep economic recession would not be included in U-3 unemployment. A marketing executive who is laid off at age 57 and stops scheduling new job interviews due to her experience of age discrimination would not be included in U-3 unemployment. A person who only works one six-hour shift per week because no full-time jobs are available in his area would not be included in U-3 unemployment.

bjourne 8y ago

No, U-3 is not misleading. See the discussion at https://news.ycombinator.com/item?id=17475481 https://news.ycombinator.com/item?id=17475481 The point of metrics is to make them comparable. Comparing apples to apples, the US unemployment rate is 3.9% vs the EU average at 7.1%. If you want to use U-6 instead, you can make an orange to orange comparison and get 7.4% for the US and roughly 14% for the EU. Given that EU wages have increased much more than US wages we can conclude that unemployment has very little to do with wage increases. And since empirical evidence trumps conjectures, we throw the so called "law" of supply and demand into the garbage bin.

shawn 8y ago
And since empirical evidence trumps conjectures, we throw the so called "law" of supply and demand into the garbage bin. Would you mind expanding on this point? It wasn't supported by your other assertions, and I'm curious how such a counterintuitive conclusion might be true.
- gota 8y ago
  I interpreted it as follows: If unemployment is indeed down (and he asserts that it is) then the supply of extra workers is down also. The salaries, following the supply/demand ratio, should be up. And they are not. Since they're not, the law of supply/demand dictating 'prices' does not work for worker's compensation.
  - bko 8y ago
    What people call "salaries" does not include employer cost of benefits. For instance, US health care spending grew 4.3% in 2016 [0]. Since many employers cover health care in the US, a growth in health care expenditures on the employer side can be seen as a increase in salary. And since health care benefits is a disproportionate amount for low or middle income workers, this will hamper their wage growth the most in relative terms. In other words, if 25% of your "pay" is health care, and health care is growing at 4%, your effective "salary" can be said to be growing at 1% as long as your premiums and coverage stay the same. [0] https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...

syshero 8y ago

U-6 is following similar trend as other Unemployment indicators. It was relatively high in the last decade. What is your point? It is relatively high but falling.

neffy 8y ago

Exactly. The other gotcha with US unemployment is that you need to add about 2% to compensate for the incredibly large number of people stuck in prisons, compared to other countries. Approximately 0.7% of the population is behind bars, and most of them are working age.

notfromhere 8y ago
theyre not unemployed because theyre not in the workforce
- turtlecloud 8y ago
  Well they should be counted. How many had to resort to crime because of no employment opportunities? That’s the real question and I would surmise that there is a percent greater than 0 that would not have stolen or robbed a bank if they had the given job opportunity. I have heard a bunch of people going into credit card stealing because it pays more than min wage.

bradleyjg 8y ago

> There haven't been any major gains to wages since the 80's except for high wage workers, who have seen a nearly 35% increase. Chart employment costs in addition. Notice the huge divergence between the growth in what employers are paying and what employees are getting in wages. Figure out where that money is going and you’ll have the real answer. Though you may not like it.

sillypuddy 8y ago
Link, or way to do that?
- dmoy 8y ago
  Well for one just look at the 5-7% annual increase in employer healthcare costs for the last couple decades, and despair :/. It's like 3-4x as expensive as it was 20 years ago for employers to offer health insurance.
  - RodericDay 8y ago
    Just because someone pays more for insurance doesn't mean they're getting more health care.
  - vkou 8y ago
    And yet, employers prefer the employer-provided health insurance model, because it increases the friction of switching/quitting jobs.
    - 2bitmachine 8y ago
      Exactly. Whether it’s H1B abuse or tying work to healthcare, employers don’t want to compete for labor. When the Chamber of Commerce supports a socialized healthcare system, I’ll believe otherwise.
    - chimeracoder 8y ago
      > And yet, employers prefer the employer-provided health insurance model, because it increases the friction of switching/quitting jobs. Where do people get this idea from? No, employers do not prefer the employer-provided model. Especially at scale (employers with more than about 1000 employees), it's dramatically more expensive for them than it would be if they didn't have to operate health plans themselves, and instead could pay employees more to purchase comparable health insurance independently. However, employers aren't the culprit, because they can't change that part of the system. The only choice an employer can make is what kind of health insurance to offer. There's one backdoor - employers can offer a cafeteria plan, which is what a few employers (like Netflix) do, but in most states, there simply are no good plans (at any price) for health insurance that are comparable to what an employer can provide, so this option is rarely used.

nabla9 8y ago

> There haven't been any major gains to wages How about unit labor cost? unit labor cost is the ratio of total labor compensation per hour worked to output per hour worked (labor productivity).

mdorazio 8y ago

My issue with U-3 isn't that it's misleading in the statistical sense, but that it says absolutely nothing about the quality of jobs that people have. If every software engineer on HN was fired tomorrow and given a minimum wage job at McDonald's, U-3 would be exactly the same. It's not really a meaningful statistic anymore when talking about actual economic health of workers unless you pair it with several other metrics. What I'd like to see is a metric of Quality Jobs that we can compare over time. Something like % of people working at least 35 hours a week at a single job that provides basic benefits and a living wage in the local market for a single worker.

deleted 8y ago
[deleted]