The official unemployment level is 9.484 million. I derived the alternates from alternate unemployment rates multiplied by the labor force.
Descriptions of U3, U4, U5, and U6 follow the next chart.
The official unemployment, also called U3 is the number of unemployed divided by the Labor Force.
Classifications
U3: U3 represents headline unemployment. To be unemployed you have to want a job, be ready to take a job, and have looked for a job. Reading want ads or looking on Monster or online does not qualify as looking to the BLS. And if you don’t look (submit an application or have an interview) the BLS does not count you as unemployed.
U4: U4 = U3 + Discouraged persons. Discouraged workers are a subset of those persons marginally attached to the labor force (see U5 below). Among the marginally attached, discouraged workers were not currently looking for work specifically because they believed no jobs were available for them or there were none for which they would qualify.
U5: U5= U4 + those marginally attached to the labor force. The BLS defines marginally attached workers as persons who are not in the labor force, want and are available for work, and had looked for a job sometime in the prior 12 months. They are not counted as unemployed because they had not searched for work in the prior 4 weeks, for any reason whatsoever.
U6: U6=U5 + underemployed individuals. Underemployed means wanting a full time job but working part time. It does not count engineers or those with Master’s Degrees working in fast food restaurants or the like.
Job Openings Are at Record Highs. Why Aren’t Unemployed Americans Filling Them?
The WSJ asks Job Openings Are at Record Highs. Why Aren’t Unemployed Americans Filling Them?
More than nine million Americans said in May that they wanted jobs and couldn’t find them. Companies said they had more than nine million jobs open that weren’t filled, a record high.
As the economy reopens, the process of matching laid-off workers to jobs is proving to be slow and complicated, a contrast to the swift and decisive layoffs that followed the initial stage of the pandemic in early 2020.
The disconnect helps to explain why so many companies are complaining about having trouble filling open positions so early in a recovery. It also helps to explain why wages are rising briskly even when the unemployment rate, at 5.9% in June, is well above the pre-pandemic rate of 3.5%. The relatively high jobless rate suggests an excess of labor supply that in theory should hold wages down.
“The labor market is a matching market where you need to choose something and be chosen by it,” said Julia Pollak, a labor economist at ZipRecruiter Inc., an online employment marketplace.
“This is not a market for shoes and pizzas. It is a very complicated market.”
Not a Market for Pizza
For starters, the correct number of people who say they want a job and are willing to work is over 11 million.
The WSJ has this example.
Mr. Taylor, who had worked in the corporate events industry for 35 years, was laid off in March of 2020. He has been sending out his résumé four to 10 times a week, but many jobs that would suit him, including project management, events coordination and production, aren’t coming back yet, he said.
His predicament is what economists call a “skills” mismatch, work experience that doesn’t line up with the needs of the marketplace.
Mr. Taylor qualifies as being unemployed because he keeps sending out resumes.
BLS Beveridge Curve
The Journal referred to a BLS Beveridge Curve chart to support the skills mismatch theory.
OK there is a skills mismatch. But it is permanent. Many of the lost jobs are never coming back.
Meanwhile, people like Mr. Taylor have little incentive to take jobs they can easily get because in many states it pays better to collect uninsurance than it does to take a job that is available.
Generous Benefits
Generous benefits might be slowing down the search of workers on the sideline. Among 24 states that have announced a June or July end to supplemental unemployment insurance benefits, the average unemployment rate in May was 4.4%. The rest of states and the District of Columbia set a later end to the program in September. The jobless rate on average in those states was 6.0% in May, though it had fallen more since January than in the states ending benefits early.
Bingo. I am not suggesting that is all of the problem but I do believe it is a huge portion of it.
As long as it pays more to be unemployed than employed, people will do whatever it takes to be officially unemployed.
Personal Anecdote
We had a leakage in the house we rent. It was caused by air conditioner condensation dripping that had been ongoing for quite some time. We did not spot it right away because it went through the walls and under the floors.
Two days ago the owner of a restoration company came by to suck out the water underneath the floor. I chatted with him for a long time.
He has 18 trucks and a few dozen employees. Starting pay is at least $18.00 per hour up to over $40 for a skilled mechanic. He is willing to train.
Guess what.
He receives applications all the time but cannot hire anyone.
Q: Why?
A: Many “applicants” told him point blank they do not want the job but are only applying because they have to in order to get unemployment benefits.
Mr. Taylor above provides another version of the this story. There is no incentive in many states to apply for those jobs that are available.
Complex Picture
Anecdotes do not constitute data, but a comparison of jobless rates on states with generous benefits to other states fits the picture.
Some of what the Journal says makes perfect sense. But so do the above anecdotes, even those by the Journal.
A huge number of people would rather wait than take a job they can get. We will find out a lot more in September and October because generous Federal benefits will end in all states.
Jobs Expand by 850,000 But Employment Drops!
For a deeper dive into the complex setup, please see my July 2 report Jobs Expand by 850,000 But Employment Drops!
Also note the High Cost But Useless Master’s Degrees and Who’s Offering Them
We keep churning out graduates unskilled to do much of anything, as skilled boomers retire.
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