The Washington Post today reported today that the unemployment rate fell to 5% which is the lowest it's been since 9/01. While predictably, the Post's spin focused on the negative aspect of the economy ("tepid growth"), 5% seems close to the theoretical limits.

Unemployment article

If one looks back 10 years, the rate has fluctuated around 5%.

BLS Statistics

The statistics looking back 10 years look like this....

2005: 5.0%
2004: 5.5%
2003: 6.2%
2002: 5.9%
2001: 4.5%
2000: 4.0%
1999: 4.3%
1998: 4.5%
1997: 4.8%
1996: 5.4%
1995: 5.7%

One can see the impact of y2k and 9/11 on the figures which dropped as 2000 approached and took a big jump after 9/11.

The questions for debate are:

What % unemployment is possible in the US?

What constitutes "full employment"?

Is it possible to get the rate much under 4%?

There is no way we can debate these questions if we continue to use the same system to gauge the unemployment rate.

The unemployment rate is constructed by surveying 60,000(I found 2 figures but I believe this one is correct)households.

How can we determine the rate by contacting only 60,000 households.



It would seem that the number of 240,000 is the key number. We have 240,000 that probably have given up looking for jobs and not being counted anymore in the survey. This is a false picture.

Also every month there is a number of people that aren't included in the numbers anymore because they have given up looking for work. So each month there is a false unemployment rate.

The best gauge for judging the unemployment rate is the business survey to calculate jobs lost or gained for that month.



So if most economists consider this survey more reliable and at the most it presents a picture of barely enough to keep up with the growth in the labor force(at the best), how can the unemployment rate be going down?

The current unemployment rate present a false and skewed picture.

Look, the point is that the BCS uses the same methodology to calculate those statistics independent of who the president is.

Can you please address my specific questions posed in this topic?

Thank you.

Well, no, because you are using fake numbers. If your numbers don't correctly represent actual unemployment figures- then why bother? instead of even trying to debate this question- you already have the idea that somehow unemployment is falling- when it has been demonstrated over and over again that these numbers are fudged - I don't care who the president is- if the numbers are wrong, the numbers are wrong.

1. Looking at historical data from the BLS, it appears that unemployment has jumped all over the board, and never been lower than it was during WWII. If we had a large scale national war, apparently we can get under 2%! (I'm not advocating this!)
However, I believe that 5% is probably a reasonable figure and attainable on a regular basis considering that since 1990, our average is roughly 5.5% ('90-'04)
http://www.bls.gov/cps/cpsaat1.pdf


2. Full employment is when the economy is producing to its maximum sustainable capacity, using labor, technology, land, capital and other factors of production to their fullest potential. In a situation of full employment, some workers may still be unemployed if they are temporarily between jobs and searching for new employment (this is called ‘frictional unemployment’).

Basically, this can happen in a number of ways, and I don't know that under current governmental conditions that this can happen. There are a number of resources that the US economy probably doesn't utilize to its fullest potential, human labor being one.

3. I really don't know about unemployment and the 4% mark. Every calculation I analyze varies slightly, and there are a number of factors involved in unemployment benefits that have little to do with the economy such as; ability to work, unemployment calculations, propensity to seek alternative employment, need or desire to seek employment, etc.

It seems historically that 4% is a good benchmark, and considering the rest of the world, it's not a bad number.

My personal opinion is that there are a number of "undesirable" industries currently employ migrant workers, immigrants, or "youth" that could possibly employ some of the American unemployed if need be. However, as Americans, we often times define self-worth by our career status and standard of living.... which often times adds fuel to the "unemployment fire"...

Fake numbers?

These are right from the government bureau of labor statistics. If you have an issue with their methodology, then perhaps you can provide your economic credentials and the reason why we should accept your point of view over professional economists. The point is that they compute these figures in a consistent way, from year to year and from month-to-month, independent of the administration at the time.

I don't see why people enter a thread that asks a question just to make an unproductive remark that doesn't address the question at all.

Again, the questions were:

What % unemployment is possible in the US?

What constitutes "full employment"?

Is it possible to get the rate much under 4%?

How about because it is not helpful to skew the numbers to those that fell off the unemployment insurance rolls like Popeye said :

"It would seem that the number of 240,000 is the key number. We have 240,000 that probably have given up looking for jobs and not being counted anymore in the survey. This is a false picture.

Also every month there is a number of people that aren't included in the numbers anymore because they have given up looking for work. So each month there is a false unemployment rate. "

If you fudge the numbers for your personal beliefs- such as politicians always do, in this case as in many others- then you have nothing to debate- you have simply engaged in a soliliquey of your personal political persuasion- you have accomplished nor proved anything.


There is only one true way of measuring unemployment- how many jobs do we have in America, how many able bodied poeple can work but can't find work- anything else is just political manipulation, nothing more.

Good Morning CR. It's a Friday and I'm in a relatively good mood... so I'll take it easy on you this morning!

1. The number of "able bodied" people in America is never a number that can objectively be quantifiable, and all economists world-wide have given up on attempting to find this holy grail. I understand your sentiment, but frankly, there's no census for injured, handicapped, or otherwise lazy people.

2. People whom cannot find work fall subject to concerns like:
- The ability to seek alternative employment (work outside original occupation)
- Geographical location
- Desire to take "undesirable" work (ie more menial labor than previously taken)

The Bureau of Labor Statistics is not a political machine, and not run by the Bush Administration. It uses unemployment claims as a benchmark as there are no other objective and quantifiable statistics to use. What you're suggesting is that we take total number of employed people in the US, and subtract it from working age population?

There are issues such as:
- contract or cash employees that do not show on payroll statistics or tax rolls
- Handicapped or injured Americans
- stay at home mothers
- Early retirees
etc, etc, etc, etc...
We couldn't possibly account for everyone who is/ or is not looking for a job, other than the unemployment commission.

They're not "fake" numbers, and that speech- by the way- is relatively inflammatory. lordhelmet didn't make it up...

Read about Canada's unemployment calculations, those of Western Europe, or those of Asia and you'll find that they're calculated in a very similar fashion.

If you don't count the 3,000,000 jobless poeple that no longer qualify for unemployment insurance, and don't count those numbers in your "unemployment" figures- then I don't care WHO makes the figures, or how many countries use the same figures- it is not an accurate picture.

3 million would certainly skew the number up, wouldn't you say?

http://www.cbpp.org/10-13-04ui.htm

The three-million figure. From late December through the middle of October, an estimated 3,053,000 unemployed individuals will have exhausted their regular unemployment benefits. About 34,000 of them will have qualified for additional unemployment aid through the federal/state extended benefits program. The remaining three million individuals will not have qualified for any federal unemployment benefits. (Oct 2004)

Bush also says nothing about the fact that as of August, the number of persons employed in payroll jobs was still 913,000 below what it was when Bush took office in 2001. At the current rate of growth it is almost certain that Democrats will be proven right about Bush being the first President since Hoover to suffer a net job loss over a full four-year term.


Dems and Repubs manipulate job numbers for thier own benefit- Kerry was just as bad as Bush in the last election- but, if you do not count those not on the unemployment rolls in your numbers- you do not have good numbers.



My own BELIEFS is that somewhere around 4% of the numbers the goverment uses starts to get into what is called "hardcore unemployable"- those you wouldn't want to hire, no matter how bad you needed poeple- but it is just a guess on my part- I don't like trying to guess with politically fudged numbers.


ALL western goverments NEED to fudge the unemployment numbers as best they can in order to stay in power- after all, in any western democracy, when folks get to a certain number of unemployed, unless they can start a war or create or, even get lucky, and have a major disaster to blame troubles on- they will be out of a job.

Ok.. .come on CR, you used the CPBB, which:
The Center on Budget and Policy Priorities is one of the nation’s premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals.The Center conducts research and analysis to inform public debates over proposed budget and tax policies and to help ensure that the needs of low-income families and individuals are considered in these debates. We also develop policy options to alleviate poverty, particularly among working families. In addition, the Center examines the short- and long-term impacts that proposed policies would have on the health of the economy and on the soundness of federal and state budgets. Among the issues we explore are whether federal and state governments are fiscally sound and have sufficient revenue to address critical priorities, both for low-income populations and for the nation as a whole.

OF COURSE IT'S IN THEIR INTEREST TO SHOW THESE FIGURES! (not intentionally yelling, but attempting to prove a point) The thing is that the article doesn't ever state where the information came from, and uses the word estimated many times.

What you're NOT discussing is that:
1. We have no accurate measure of how many of these people are actually looking for work.
2. We have no way to calculate how many of these people have considered taking jobs that before may have not been in their area of expertise.
3. We cannot measure how many of these people have considered moving to find jobs. Take a look at this table;
http://www.bls.gov/lau/#tables

it's obvious that some states have it better than others, and vice versa.

FINALLY-take a look at what this article states, ver batim; "Based on actual figures through August and the author’s estimates through mid-October" Estimates that came from what??

You have to consider that there's no real way to know how many people got jobs that they didn't report to the Unemployment Commission after their benefits ran out. Where do they get the figures??? Hmmm.....

Many of us have done things that we wouldn't necessarily say that we "enjoyed" in order to keep the electricity running and a roof over our heads, of which the CPBB has no way of measuring. It's one of those new-fangled liberal words called "under-employed".

The questions for debate are:

What % unemployment is possible in the US?

What constitutes "full employment"?

Is it possible to get the rate much under 4%?

All of these questions depend greatly on how we define unemployed, as covered by numerous posters.

The US could achieve 'full employment' where everyone who wants a job can find one.

A few things keep our employment levels (and hence wages) artificially low: most egregiously, the payroll tax. The payroll tax adds ~15% to the cost of employing just about everyone in the country. I'm not sure of the elasticity of demand for employment, but even if it is relatively inelastic, reducing the cost of employment by 15% would increase employment by several percent.

Additionally, the lower brackets of the income tax have a similar effect. The upper income brackets tend to capture income from non-wage sources, including artifically high wages due to market distortions. Put another way, some people get paid more than they're willing to work for, and more than equivalent performance would cost elsewhere. I'm thinking multimillion dollar salaries here, where someone equally capable could be hired for less.

A warning, though, merely shifting taxes from wages to other sources could be equally harmful.

For years the US, from a tax perspective, has gone easy on investment and wealth, with the not entirely wrong idea that taxing such things would reduce investment and wealth, and thus seriously damage the overall economy. As such, those with enough 'extra' wealth can invest, and earn more. . . an open-ended cycle where wealth begets wealth. Of course most of us have a few extra dollars, and we like this system -- but we're go-karts racing at Indy.

I hope that to this point in my post you'll agree that taxing wages lowers employment, but then so does taxing investment. This brings us to 'the marginal propensity to consume', as I think it's relevant to any discussion of employment. Much of our economy, maybe 2/3'ds, as well as much of the world's economy, is derived from consumer purchases. As people earn more and more money, a smaller proportion of their earnings is spent on consumption, with the excess going to investment. There's an important balance here: if too much money is being invested, and not enough being used to consume, we have a situation where too many dollars are chasing around too few investment opportunities, and we get a bubble, be it real estate, tech stocks, or tulip bulbs. In order for these investments to be truly profitable, demand must rise, which means we need more money in the pockets of more people. Conversely, if too many people have money in their pockets, and not enough people are investing, demand for goods exceeds the supply, and we have price inflation -- that is until those who do have money to invest use it to chase profits, increase production, and meet demand.

Which brings me to the crux, and my offerred solution:
If we tax wages, we get unemployment, and low wages.
If we tax investment, we get under-production, and high prices (and unemployment)
If we tax wealth, we also get under-production, and unemployment

The key is to tax the use of things that are not produced, things that are fixed in supply, and thus who's total supply is not affected by taxation. How much government revenue could be raised by such taxes remains to be seen, but ask yourself how much money is in oil, or real estate (at least the land portion of real estate).

I love how conservatives complained about the unemployment numbers during the Clinton administration (who mentioned the numbers whenever possible) are now defending them against liberals who find them obsolete now that a Republican is in the White House. However, I do not share this cynical view.



The numbers are what they are... no one manipulates them. The only thing manipulated is the coverage of the numbers. The news today is that the job market "isn't making its forcast" not "unemploymente is at a 4 year low." So far the economy has created 1,088,000 this year.

Some perspective... remember when we were booming in 97?

June 1997
10.4 = unemployment rate among blacks.
7.6 = unemployment among latinos.
5.0 = overall unemployment rate.
$424.03 = average weekly earnings by factory-line workers and non-managers in the services sectors.

June 2005
10.3 = unemployment rate among blacks.
5.8 = unemployment among latinos.
5.0 = overall unemployment rate.
$541.22 = average weekly earnings by factory-line workers and non-managers in the services sectors. (Up 12.46% since Bush became President.)

When the economy is at around 5% unemployment there not a lot of room for huge month to month job increases.

What % unemployment is possible in the US?

Anything less that 4% is difficult. The dot com boom only got us under 4%, it’s not likely unless there’s a war type situation.

What constitutes "full employment"?

Somewhere between 5% and 4%

Is it possible to get the rate much under 4%?

This ties into my first answer.

http://www.marketwatch.com/news/story.asp?...teid=mktw&dist=



This is the survey of 60.000 households that give us the unemployment rate of 5.0 for the month of June. It shouldn't be too hard to figure that the 163,000 and the 161,000 is a washout. So how did the unemployment go down? Of course the 240,000 that were dropped from the labor force probably because they gave up on the labor market. Or at the least the majority of them gave up. So to me that is where the unemployment rate is a false figure. I didn't say it was a fraud, which would be different.

Also(as it was quoted in a earlier post) most economists consider the survey of 400,000 business in preference to the less reliable survey of 60,000 households(which is used to calculate the unemployment rate)

aevans176 is absolutely correct in his assessment on unemployment. Just to add one thing, it is possible for unemployment to be too low. If businesses look to expand but cannot because of a dearth in available workers, you can run into problems of economic stagnation.

At 5%, the unemployment situation in the USA is in good shape. Compare that with our European friends who struggle with consistent unemployment rates topping 10%.

If folks are employed voluntarily, there's no such thing as too low employment.

Wages would simply have to rise, and companies would compete for labor - and the market would efficiently allocate labor to the most productive industries, just as the market allocates other resources.

The bugaboo for low unemployment is the risk of inflation, though I feel that the risks of inflation are limited to certain markets. With full employment, goods and services shouldn't see an increase in price, because production capacity would increase to meet demand. However, the production of real estate, as well as nonrenewable resources, and other physical limitations such as broadcast frequency bandwidth, can not, and would not increase - and therefore the price of these things would increase. There is no efficient market in these things, because there are no suppliers; this is an excellent reason to tax them, as increasing the holding cost of these items would lead to the efficient use thereof, leaving more resources available for productive use.

What % unemployment is possible in the US?

By classical macro economics, around 5% is the limit in an economy based largely on industrialization and manufacturing. Our economy is not like that any longer. Information flow is more important than manufacturing, as is keeping the information reliable. This might sound simple, but consider what it takes to support the Internet backbones, running at 80 GB/sec last time I saw, which was about five years ago.

Try this: Go to a website located across an ocean. Make it the Atlantic or Pacific, it won't matter. How long did the site take to load? Do you have any idea how many hops it took to get there and back, and what were the media -- fiber optic, microwave, satellite, transoceanic cable? This stuff ain't cheap! Yet it's easy to take for granted, until a critical link goes down that is. Then businesses go out of business, unless they have planned for disaster, which most don't do.

Too expensive, you know.

Anyway, the information economy infrastructures could very well support an employment rate of 100% for citizens (those looking for work), plus an overflow percentage of foreign outsourcers. The problem comes in with wage inflation, as companies compete for high-competence information workers. That comes from classic economics and union wage inflation pressure; however, the production of high-competence information workers has tended to gain way over wage inflation.

So, the economy can handle 100% employment, but our current breed of economists can't. They're still trying to figure it out, and it doesn't help with a global economy for understanding what is going on.

It's time to write new economic text books.

What constitutes "full employment"?

Full employment is when everyone who wants a job has one, and one that pays enough to meet the expenses of living. Taking a mac-job while sitting on a college degree, possibly graduate level, does not constitute employment. That's desperation.

Is it possible to get the rate much under 4%?

Only if the economists believe it to be possible. I think that's a current problem with our economy. If the advisors have no faith in it to produce 100% employment without wage inflation, why should any of the business leaders?

Just ignore the numbers, eh? It simply can't happen. That's what they learned back in college, right? Which was when, 1960 or so? Maybe 1950 or even '40.

Newsflash: The world changed in 1993 when the Internet became accessible to everyone worldwide, not just Unix weenies scattered here and there feeling macho with their esoteric commands. And they said it couldn't be done.

Here we are, so pay attention. The next wave of information economic growth will make the old school economists' heads spin faster than political comments around the blogosphere.

The US unemployment rate could very well go into negative numbers, requiring nimble adjustments to the special visas for foreign employees. Remember that the last bubble was based on irresponsible investing into impossible Internet dreams. We are older and wiser now, but the real potentials have barely been scratched. It'll be harder for the shysters to get venture capital bucks to attempt anything not currently possible.

Which opens the door to consultants to let business leaders know when something might be possible. That's employment. These consultants will need support staff. More employment. Then designers get in there, coders, hardware vendors, chip fabs, network folks, plus all the support staff, and ONWARD TO INFINITY!

Um, er, 'scuse me, I get worked up.

I do think the next bubble is forming though, and this time it could become a higher plateau than the world has ever seen in its economies. I think of it as a quintessential economic revolution, way bigger in its impact than the industrial revolution, even more important than landing on the moon.

Now is not the time for backward thinking. Unfortunately, that's what we're stuck with for a time.

Some stats about the current unemployment rate

http://www.marketwatch.com/pf/default.asp?...ktw&dist=lpftab
/pf/default.asp?siteid=mktw&dist=lpftab



With a participation rate currently of 66%, which is a 15 year low, this is still lower than the 67.2% rate in March 2001, when the recession began.



With the most current data in this study, the lowest the unemployment rate could have been was somewhere between 6.5% and 8.7%.

What % unemployment is possible in the US?
0 percent employment could be possible. However, the minimum wage laws would have to be repealed in order for it to be profitable for employers to hire everyone.

What constitutes "full employment"?
Someone pointed out that full employment means having a job that takes care of the basic human needs without burdening the worker with unreasonable hours. A job should also be something that is productive and the worker is reasonably satisfied with.

Job satisfaction is something that economists don't do an adequate job at measuring. There are workers who are uncomfortable around people but have to go into sales or teaching simply because manufacturing jobs are disappearing.
The IT industry itself is projected to shrink worldwide.
Programming Jobs Losing Luster in U.S.
I studied Computer Science in college and graduated in 2003. But after a year of being unemployed and working at low paying part time jobs, I went over to Korea to teach English.