4 ms·

But if that U3 metric doesn't describe what normal people feel (the sort of people that don't know the difference between U3 and U6), then there is an argument

But if that U3 metric doesn't describe what normal people feel (the sort of people that don't know the difference between U3 and U6), then there is an argument for calling its "official" designation a sleight of hand. The U6 metric counts underemployment as unemployment. This reflects the common sentiment in the media, and it obviously shows a lack of recovery where other metrics have fully recovered by now.

sanderjd 12y ago
I would be very interested in knowing the history / politics / whatever of how U3 became the "official" measure, what that really means, and what the arguments are for and against its continued use. For instance, most people (the vast majority, anecdotally) don't have any idea that there are multiple measures, and what the one they always hear about does and doesn't include. I've never heard the terms U3, etc. used on the television news or seen them on the front page of the NYT. Why is that? I doubt it's some conspiracy, but I'm genuinely curious how we got here, why we're still here, and whether we should instead be somewhere else.
- med00d 12y ago
  I'm not sure how or why that became the standard, but it's the standard per the International Labour Organization. The U6 rate only started being recorded in 1994.
  - me2i81 12y ago
    U3 data goes back to 1890. There's always someone, usually in an opposing political camp, who says "it's misleading" when it goes down, or when it goes up. Both the left and the right have done this sort of handwaving over the years, but having a stable statistic that goes back many decades is useful even if you want to look at others for a more complete picture about what's going on. On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. You could argue that there's a bit of a gap there, like around 1.5% if you look at recent history, and maybe even argue that it's structural, i.e. that information technology is causing full-time work to go away, etc. but that's a technical argument to have, which would require looking at a lot of data and not just trying to score points by cherry-picking.
    - med00d 12y ago
      >On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. Agreed. I argue this point all the time, actually. I think it's interesting to go back through and look at how unemployment fairs in comparison to the political party of the president during that time. Looking at the U3 rate for the past 50 years, unemployment has only gone down once under a republican president (Reagan) and Carter is the only democrat in the past 50 years who didn't see unemployment drop from the time he took office to the time that he left office.
    - sanderjd 12y ago
      Ah, this seems like the key answer to my question - it's the only one that's been tracked for generations, and we often want to compare across that time scale.
- jhaile 12y ago
  So I don't have any specific knowledge on this, but the intuitive answer is a combination of: a) The Department of Labor puts out these measures in a boring, dry document. The news media then picks which measures to report on that will grab headlines. b) Politicians and public officials latch onto the numbers that allow them to paint government and policies in the best (or worst) possible light. Both of these lead to simplification of the source data. And if you are trying to paint it positively, you'd probably pick the narrowest, lowest unemployment number.
  - sanderjd 12y ago
    Not necessarily disagreeing with your intuition here, but that doesn't appear to be what happens - pretty much everybody reports on that same U3 measure. Certainly there are articles and discussions about other measures as well (for instance, the OP), but I never seem to see them in the "mainstream".
- rhino369 12y ago
  Since the U3 and U6 more or less follow the same trend., it makes sense to keep using the same reported measure for continuity. People know that 8% "umemployment" (aka U3) is bad. If you suddenly start reporting U6, people will think a 8% U6 is bad, when it is rather good. If you want to use it to measure or model something else, you might have a reason to pick a different measurement.
- krschultz 12y ago
  I think of two other imperfect measures - the Dow Jones Industrial Average, and the relative temperatures (Windchill, Head Index). The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated. Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong. If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is. Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.
- nl 12y ago
  U3 is the official measure because it matched the International Labour Organization definition[1]. Most countries use the same definition. Measurement is always hard, and always requires caveats. There are good arguments both for including discouraged workers (hidden unemployment) and part-time workers who would prefer full time work (underemployment) in unemployment statistics. There are also good arguments against it, mainly around the fact that gathering those numbers tends to be more error-prone. [1] http://en.wikipedia.org/wiki/Unemployment#United_States_Bureau_of_Labor_statistics http://en.wikipedia.org/wiki/Unemployment#United_States_Bure...
Lawtonfogle 12y ago
Just because something has been hidden in plain sight doesn't mean it isn't being hidden. Many people dig no deeper than the news headlines and I do think this has been abused in different areas to mislead the public.
thephyber 12y ago
I have to agree with Lawtonfogle on this. "Normal people" (which is a No True Scotsman fallacy, BTW) don't understand U3 unemployment because it's a wonky term with a precise (and possibly even counter-intuitive) definition and the people that "feel" something other than U3 are more than likely to not do basic research, the kind of people that don't bother to take personal responsibility and/or don't bother to find a way to train themselves for a better job (which likely makes them self-selecting for U6 unemployment). Isn't it more likely that the U3 number is simply a more useful number for the class of people that wonk-talk about employment statistics and set policy? It's more targeted than U6 (which is a catchall for "people who are not currently employed or underemployed and might or might not be looking for work"). It's the same reason the wonks tack on "seasonally adjusted non-farmworkers" when talking about these figures -- those terms mean relevant things and fundamentally change the population of workers you are talking about. Do the "normal" people concern themselves with the intricate details of Fed monetary policy, growth and yield details of equities, bond yeilds and their effects, foreign policy beyond the large military conflicts that the US is currently involved in? Nope. Why should they know the difference between "U3 unemployment" and "U6 unemployment" if they don't bother to learn? I agree with higher-raked comments that the U3 unemployment numbers are useful if (1) you consistently use U3 in all reporting (don't jump from U3 to U6 to other metrics), you talk about trends and not the absolute number, and you describe which one you are using and what the caveats are of using that number. For reference, the Wikipedia graph of U3 - U6: https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemployment_measures.svg https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemp... U3 and U6 track very well with each other. There are permanently structurally "unemployed"/"underemployed" people in the country. It doesn't seem to budge much, whereas the U3/U6 numbers do seem to change over time. This shows that U3 is a decent trend predictor of U6, suggesting that there is little difference between U3 and U6 when talking about trends. Also note that U3 data goes back MUCH further in time, which is another suggestion that it is a long-standing convention and not "sleight of hand".

sanderjd 12y ago

I would be very interested in knowing the history / politics / whatever of how U3 became the "official" measure, what that really means, and what the arguments are for and against its continued use. For instance, most people (the vast majority, anecdotally) don't have any idea that there are multiple measures, and what the one they always hear about does and doesn't include. I've never heard the terms U3, etc. used on the television news or seen them on the front page of the NYT. Why is that? I doubt it's some conspiracy, but I'm genuinely curious how we got here, why we're still here, and whether we should instead be somewhere else.

med00d 12y ago
I'm not sure how or why that became the standard, but it's the standard per the International Labour Organization. The U6 rate only started being recorded in 1994.
- me2i81 12y ago
  U3 data goes back to 1890. There's always someone, usually in an opposing political camp, who says "it's misleading" when it goes down, or when it goes up. Both the left and the right have done this sort of handwaving over the years, but having a stable statistic that goes back many decades is useful even if you want to look at others for a more complete picture about what's going on. On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. You could argue that there's a bit of a gap there, like around 1.5% if you look at recent history, and maybe even argue that it's structural, i.e. that information technology is causing full-time work to go away, etc. but that's a technical argument to have, which would require looking at a lot of data and not just trying to score points by cherry-picking.
  - med00d 12y ago
    >On some planet having U6 go from above 17% to just over 11% from 2009 to the present counts as "failed recovery" but I'm not quite sure how. Agreed. I argue this point all the time, actually. I think it's interesting to go back through and look at how unemployment fairs in comparison to the political party of the president during that time. Looking at the U3 rate for the past 50 years, unemployment has only gone down once under a republican president (Reagan) and Carter is the only democrat in the past 50 years who didn't see unemployment drop from the time he took office to the time that he left office.
  - sanderjd 12y ago
    Ah, this seems like the key answer to my question - it's the only one that's been tracked for generations, and we often want to compare across that time scale.
jhaile 12y ago
So I don't have any specific knowledge on this, but the intuitive answer is a combination of: a) The Department of Labor puts out these measures in a boring, dry document. The news media then picks which measures to report on that will grab headlines. b) Politicians and public officials latch onto the numbers that allow them to paint government and policies in the best (or worst) possible light. Both of these lead to simplification of the source data. And if you are trying to paint it positively, you'd probably pick the narrowest, lowest unemployment number.
- sanderjd 12y ago
  Not necessarily disagreeing with your intuition here, but that doesn't appear to be what happens - pretty much everybody reports on that same U3 measure. Certainly there are articles and discussions about other measures as well (for instance, the OP), but I never seem to see them in the "mainstream".
rhino369 12y ago
Since the U3 and U6 more or less follow the same trend., it makes sense to keep using the same reported measure for continuity. People know that 8% "umemployment" (aka U3) is bad. If you suddenly start reporting U6, people will think a 8% U6 is bad, when it is rather good. If you want to use it to measure or model something else, you might have a reason to pick a different measurement.
krschultz 12y ago
I think of two other imperfect measures - the Dow Jones Industrial Average, and the relative temperatures (Windchill, Head Index). The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated. Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong. If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is. Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.
nl 12y ago
U3 is the official measure because it matched the International Labour Organization definition[1]. Most countries use the same definition. Measurement is always hard, and always requires caveats. There are good arguments both for including discouraged workers (hidden unemployment) and part-time workers who would prefer full time work (underemployment) in unemployment statistics. There are also good arguments against it, mainly around the fact that gathering those numbers tends to be more error-prone. [1] http://en.wikipedia.org/wiki/Unemployment#United_States_Bureau_of_Labor_statistics http://en.wikipedia.org/wiki/Unemployment#United_States_Bure...

Lawtonfogle 12y ago

Just because something has been hidden in plain sight doesn't mean it isn't being hidden. Many people dig no deeper than the news headlines and I do think this has been abused in different areas to mislead the public.

thephyber 12y ago

I have to agree with Lawtonfogle on this. "Normal people" (which is a No True Scotsman fallacy, BTW) don't understand U3 unemployment because it's a wonky term with a precise (and possibly even counter-intuitive) definition and the people that "feel" something other than U3 are more than likely to not do basic research, the kind of people that don't bother to take personal responsibility and/or don't bother to find a way to train themselves for a better job (which likely makes them self-selecting for U6 unemployment). Isn't it more likely that the U3 number is simply a more useful number for the class of people that wonk-talk about employment statistics and set policy? It's more targeted than U6 (which is a catchall for "people who are not currently employed or underemployed and might or might not be looking for work"). It's the same reason the wonks tack on "seasonally adjusted non-farmworkers" when talking about these figures -- those terms mean relevant things and fundamentally change the population of workers you are talking about. Do the "normal" people concern themselves with the intricate details of Fed monetary policy, growth and yield details of equities, bond yeilds and their effects, foreign policy beyond the large military conflicts that the US is currently involved in? Nope. Why should they know the difference between "U3 unemployment" and "U6 unemployment" if they don't bother to learn? I agree with higher-raked comments that the U3 unemployment numbers are useful if (1) you consistently use U3 in all reporting (don't jump from U3 to U6 to other metrics), you talk about trends and not the absolute number, and you describe which one you are using and what the caveats are of using that number. For reference, the Wikipedia graph of U3 - U6: https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemployment_measures.svg https://upload.wikimedia.org/wikipedia/commons/9/9b/US_Unemp... U3 and U6 track very well with each other. There are permanently structurally "unemployed"/"underemployed" people in the country. It doesn't seem to budge much, whereas the U3/U6 numbers do seem to change over time. This shows that U3 is a decent trend predictor of U6, suggesting that there is little difference between U3 and U6 when talking about trends. Also note that U3 data goes back MUCH further in time, which is another suggestion that it is a long-standing convention and not "sleight of hand".