Friday, November 04, 2011

Unemployment. The cost grows.

Current unemployment measured by U-3 falls to 9.0 percent, and total unemployment measured by U-6 is at 16.2 percent for October 2011. (see Table A-15, Bureau of Labor Statistics).

The Blog Calculating Risk often produces the best graphics of what is happening. In the article which you can find at the link you will see two graphs. The first shows Unemployment by Duration. As everyone can see, long term unemployed from 1969 to 2008 was always less than the short term unemployed as a percentage of the civilian labor force. Since 2009 the effect is dramatic as the long term unemployment dominates the short term unemployment. This is unarguably a structural change in the labor market and has to be correlated with economic policies since 2009.

So who are the long term unemployed? The second chart in the Calculated Risk blog shows the Unemployment Rate by Education . The chart illustrates the answer in part. Labor economists know the answer without looking. That is, the long term unemployed are most likely to be with the least human capital, the least experience and those in jobs that have been structurally depressed or eliminated. While the second chart does not deal with all three reasons, clearly a change is visible. The brunt of the unemployed is always born by those with the least education, but look how dramatically that too has changed since 2009.

What can we conclude from this? Well two graphs do not predict or even explain what is going on and is simply a description of the events we are experiences, but the circumstantial evidence is that policies designed to deal with the 2007 recession are sadly ineffective and wrongly applied.

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