Is despair deflating the unemployment numbers?
Spoiler Alert: The answer is not much.
In my previous post, I talked about how the unemployment for July decreased from 9.5% to 9.4% mainly on the merits of people leaving the labor force altogether. Basically, the number of people employed dropped, but the number of people who are unemployed dropped too (and dropped faster). So… if the unemployed people didn’t move into the “employed” column, where did they go?
Some people have suggested they are giving up in despair. Let me explain:
A person is “unemployed” for the purpose of labor statistics only if they have looked for work in the last four weeks. If they stop looking, they’re simply not in the labor force anymore. So, in theory, if people are at home sobbing uncontrollably because they can’t find a job, they’re not unemployed, they’re just not in the labor force.
Fortunately, I discovered that the Bureau or Labor Statistics has been gathering a very useful statistic for the last 15 years called “Persons Who Currently Want a Job”. This is basically a count of people who have given up looking, but would still like to have a job. I suppose you could call this either the “despair index” or the “laziness index” depending on how cynical you are.
Here’s a graph of the “Want a Job” number over the last 5 years.
So the number of people who wish they had a job but have stopped looking has increased dramatically this year, which is somewhat reducing the unemployment rate.
The number of people who aren’t looking for a job but still want one has increased about 1,000,000 in the last year, representing by far the largest increase in since we started tracking the data.
If you look at the unemployment rate with and without the “Wants a Job” crowd, they look pretty much the same. In other words, there’s not really that much hiding in the numbers here. There’s maybe a .3-.4% increase in the unemployment rate that can be attributed to despair. Or at least, attributed to new found despair, since we normally have between 4.5 million and 5.0 million people in this category anyway.
What is really weird is that it looks like a lot of people are just up and leaving the work force, either through retirement or due to going back to school. Only a quarter of the decrease in the work force over the last couple months is attributable to an increase in the “Wants a Job” demographic. Even if you added them back into the labor force… the labor force is STILL decreasing.
So… while there is a case to be made for the “despair thesis” (as I’m now calling it), it looks like we’re also just seeing a good number of people who don’t much care for work anymore, thank you.