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Economics student here. One reason Economists are interested in Unemployment is because when it reaches a certain level it puts pressure on prices through upwa

Economics student here. One reason Economists are interested in Unemployment is because when it reaches a certain level it puts pressure on prices through upwards wage pressure (fewer people looking for work means employers need to pay more.) Defining Unemployment narrowly as only those actively looking for work and recently unemployed provides for a statistic best measures the labor market's functioning. As others have noted, there are many other statistics that are collected which can elucidate social concerns.

mikecb 12y ago
NAIRU is hypothesized for some inflationary effects, but it's not well understood. Still, nice mention.
nostromo 12y ago
That shows problem with the official number though. If unemployment is down, wages should be up. But wages are down. That implies the unemployment rate is not accurately reflecting the true supply of labor. Or, it shows what I believe: demand for labor is decreasing even as the economy grows.
- intopieces 12y ago
  >Or, it shows what I believe: demand for labor is decreasing even as the economy grows. I hope this is the case. Automation should be putting a great deal of workers out of the labor force. The question is how can we deal with it: through workforce education and skill retooling? Through social assistance programs? It will likely be the question of our generation.
  - dtlawhon 12y ago
    Skill retooling would help to an extent, but one programmer today can do more work than 10 programmers could do 15 years ago, or maybe even 10 years ago. That trend isn't going away. Look at Django. If you include the hundreds of open-source modules with everything from messaging to billing to social media already coded, you can string together web apps in an hour that would take whole teams months and months from scratch. Within the next decade or two I'd estimate that programming will hit its peak employment and start to decline as more and more work is automated.
    - kansface 12y ago
      Perhaps, but consider how much of the world still isn't digital (entire industries). Most business isn't - way more money flows through meatspace. I also think there is a good chance VR or AR will create another economic boon comparable to the Internet within your time span.
      - dtlawhon 12y ago
        I'm including a VR boom within that estimate. And to be clear, there's still plenty of opportunity. Something like 3 billion people are supposed to come online in the next decade, there will be tremendous opportunities to create solutions for problems we can't fathom. But my point is those solutions can be implemented by a fraction of the programmers that used to be needed. And while there will lag between VR becoming popular and its design process becoming automated as well, it will still happen. I also don't think this is necessarily bad, I'm just trying to point out that the conventional wisdom of "if we send people to STEM fields we'll keep the traditional economy intact even with automation" is not a long-term solution. The logical end-result of current tech trends is you imagine something and it appears in front of you almost instantaneously, no coding required. As others have said, raw creativity will take precedence over technical skills, and most realistically we'll need a basic income and severely reduced workweeks.
- adventured 12y ago
  This is wrong. Wages are rising. And as slack continues to be removed from the labor pool, wages will continue to rise. From a week ago: "An important measure of household income rose in December by the largest amount in nearly 8 years, signaling a long-overdue rebound in family earning power." "Data from Sentier Research show that median household income in December rose 3.3% from the year before, the strongest year-over-year reading since October, 2006" http://finance.yahoo.com/news/families-are-finally-earning-more-151120875.html http://finance.yahoo.com/news/families-are-finally-earning-m... From July: "U.S. Wages, Benefits Rise at Fastest Pace in Almost Six Years" http://www.wsj.com/articles/employment-costs-rise-0-7-in-second-quarter-1406810233 http://www.wsj.com/articles/employment-costs-rise-0-7-in-sec...
  - nostromo 12y ago
    From your own source: https://s2.yimg.com/bt/api/res/1.2/WphI5hi8meGKLNEtu6eygg--/YXBwaWQ9eW5ld3M7cT04NQ--/http://l.yimg.com/os/publish-images/finance/2015-01-27/3603d370-a637-11e4-aaa8-7dade6203616_HHI.JPG https://s2.yimg.com/bt/api/res/1.2/WphI5hi8meGKLNEtu6eygg--/... So, incomes were flat or down for 14 years, and have since slightly rebounded to be just 4% less than in 2000, not 8% like they were. Shall I pop the champagne or do you want to?
    - seizethecheese 12y ago
      Your data is for households. One recent trend is that households are getting smaller which skews household statistics.
    - thedufer 12y ago
      Neither income nor unemployment is back to previous normal levels. How exactly is this evidence that there's no correlation between the two?
    - adventured 12y ago
      Of course wages were flat or down, there hasn't been a particularly strong - or sustained strength - labor market since 2000. In the 2005-2007 time frame there was a brief respite, and that of course was not only fake (powered by the housing bubble) but crashed. Fact is, once enough slack is removed from a labor pool, wages rise. Happens every time. It's exactly what occurred in the 1980s and 1990s. Wages weren't booming in the 1990s until the unemployment rate got to a certain low level toward the last several years of the decade. I wouldn't expect wages to rise when U3 unemployment is 7% or 8%. I would expect to see it at closer to the 4% to 6% range. That's historically what has been the case, and we're seeing it happen again right now. If we add another ~3 million jobs in 2015, wages will rise at a healthy clip.
- sliverstorm 12y ago
  If unemployment is down, wages should be up. But wages are down. That implies... Or it could show this is a multivariable system with more than just one input?
- ChrisLomont 12y ago
  Wages are rising [1] [1] https://research.stlouisfed.org/fred2/series/ECIWAG https://research.stlouisfed.org/fred2/series/ECIWAG
  - hudibras 12y ago
    But not by as much as before the recession[1] [1] http://research.stlouisfed.org/fred2/graph/?g=Z7x http://research.stlouisfed.org/fred2/graph/?g=Z7x Same graph, different y-axis.
kaonashi 12y ago
> Unemployment is because when it reaches a certain level it puts pressure on prices through upwards wage pressure Unfortunately, the policy response seem to not be to wait for inflation to appear, but to change policy to increase unemployment whenever it crosses a magical threshold.

mikecb 12y ago

NAIRU is hypothesized for some inflationary effects, but it's not well understood. Still, nice mention.

nostromo 12y ago

That shows problem with the official number though. If unemployment is down, wages should be up. But wages are down. That implies the unemployment rate is not accurately reflecting the true supply of labor. Or, it shows what I believe: demand for labor is decreasing even as the economy grows.

intopieces 12y ago
>Or, it shows what I believe: demand for labor is decreasing even as the economy grows. I hope this is the case. Automation should be putting a great deal of workers out of the labor force. The question is how can we deal with it: through workforce education and skill retooling? Through social assistance programs? It will likely be the question of our generation.
- dtlawhon 12y ago
  Skill retooling would help to an extent, but one programmer today can do more work than 10 programmers could do 15 years ago, or maybe even 10 years ago. That trend isn't going away. Look at Django. If you include the hundreds of open-source modules with everything from messaging to billing to social media already coded, you can string together web apps in an hour that would take whole teams months and months from scratch. Within the next decade or two I'd estimate that programming will hit its peak employment and start to decline as more and more work is automated.
  - kansface 12y ago
    Perhaps, but consider how much of the world still isn't digital (entire industries). Most business isn't - way more money flows through meatspace. I also think there is a good chance VR or AR will create another economic boon comparable to the Internet within your time span.
    - dtlawhon 12y ago
      I'm including a VR boom within that estimate. And to be clear, there's still plenty of opportunity. Something like 3 billion people are supposed to come online in the next decade, there will be tremendous opportunities to create solutions for problems we can't fathom. But my point is those solutions can be implemented by a fraction of the programmers that used to be needed. And while there will lag between VR becoming popular and its design process becoming automated as well, it will still happen. I also don't think this is necessarily bad, I'm just trying to point out that the conventional wisdom of "if we send people to STEM fields we'll keep the traditional economy intact even with automation" is not a long-term solution. The logical end-result of current tech trends is you imagine something and it appears in front of you almost instantaneously, no coding required. As others have said, raw creativity will take precedence over technical skills, and most realistically we'll need a basic income and severely reduced workweeks.
adventured 12y ago
This is wrong. Wages are rising. And as slack continues to be removed from the labor pool, wages will continue to rise. From a week ago: "An important measure of household income rose in December by the largest amount in nearly 8 years, signaling a long-overdue rebound in family earning power." "Data from Sentier Research show that median household income in December rose 3.3% from the year before, the strongest year-over-year reading since October, 2006" http://finance.yahoo.com/news/families-are-finally-earning-more-151120875.html http://finance.yahoo.com/news/families-are-finally-earning-m... From July: "U.S. Wages, Benefits Rise at Fastest Pace in Almost Six Years" http://www.wsj.com/articles/employment-costs-rise-0-7-in-second-quarter-1406810233 http://www.wsj.com/articles/employment-costs-rise-0-7-in-sec...
- nostromo 12y ago
  From your own source: https://s2.yimg.com/bt/api/res/1.2/WphI5hi8meGKLNEtu6eygg--/YXBwaWQ9eW5ld3M7cT04NQ--/http://l.yimg.com/os/publish-images/finance/2015-01-27/3603d370-a637-11e4-aaa8-7dade6203616_HHI.JPG https://s2.yimg.com/bt/api/res/1.2/WphI5hi8meGKLNEtu6eygg--/... So, incomes were flat or down for 14 years, and have since slightly rebounded to be just 4% less than in 2000, not 8% like they were. Shall I pop the champagne or do you want to?
  - seizethecheese 12y ago
    Your data is for households. One recent trend is that households are getting smaller which skews household statistics.
  - thedufer 12y ago
    Neither income nor unemployment is back to previous normal levels. How exactly is this evidence that there's no correlation between the two?
  - adventured 12y ago
    Of course wages were flat or down, there hasn't been a particularly strong - or sustained strength - labor market since 2000. In the 2005-2007 time frame there was a brief respite, and that of course was not only fake (powered by the housing bubble) but crashed. Fact is, once enough slack is removed from a labor pool, wages rise. Happens every time. It's exactly what occurred in the 1980s and 1990s. Wages weren't booming in the 1990s until the unemployment rate got to a certain low level toward the last several years of the decade. I wouldn't expect wages to rise when U3 unemployment is 7% or 8%. I would expect to see it at closer to the 4% to 6% range. That's historically what has been the case, and we're seeing it happen again right now. If we add another ~3 million jobs in 2015, wages will rise at a healthy clip.
sliverstorm 12y ago
If unemployment is down, wages should be up. But wages are down. That implies... Or it could show this is a multivariable system with more than just one input?
ChrisLomont 12y ago
Wages are rising [1] [1] https://research.stlouisfed.org/fred2/series/ECIWAG https://research.stlouisfed.org/fred2/series/ECIWAG
- hudibras 12y ago
  But not by as much as before the recession[1] [1] http://research.stlouisfed.org/fred2/graph/?g=Z7x http://research.stlouisfed.org/fred2/graph/?g=Z7x Same graph, different y-axis.

kaonashi 12y ago

> Unemployment is because when it reaches a certain level it puts pressure on prices through upwards wage pressure Unfortunately, the policy response seem to not be to wait for inflation to appear, but to change policy to increase unemployment whenever it crosses a magical threshold.