The Myth of the Unemployment Rate

Unemployment is a myth.

The highly publicized “unemployment rate” is a 50 year old yardstick with the numbers sand-blasted all the way off, and we are using it to gather intelligence that affects public policy?

In the information economy, what use is it to measure how many people are dead weight?

Before, when the only way a person worked was on a factory assembly line, and their only hope for income was continued clocking-in and widget-making, to measure the economy by unemployment made sense.

Now, a $25 webcam, hours of practice, and a free YouTube account is all that stands between you and an income. Or a $15 used power saw and an etsy shop to sell hand-made crafts made from used (free) pallets. In 25 minutes you can take what you are already good at, and make $1 doing it.

I get it (I’ve been there), there’s still no quick way (other than getting a job) to a reliable paycheck. To say that I’ve oversimplified making money online is itself an understatement.

But my point remains. Why are we measuring the health of the economy using a 50 year old broken yard stick?

Because there’s no better way to measure it, and the news cycle depends on reporting to make their money. So they have to say something.

Do we have to listen?

Please, do yourself a favor and filter everything you hear about the unemployment rate through the lens of “is this helpful?”

Using a broken yardstick to manufacture fake handwringing about an overblown non-problem doesn’t fix anything.

Worse, the handwringers are not actually concerned with fixing the problem. They’re likely more concerned with the number of pageviews they can muster in favor of the problem, or how many votes it’ll pick up to promise to fix the problem, or how they can spin the numbers to indicate that the have fixed the problem.

But that doesn’t mean I have to participate. I choose to be a part of the solution. I’m going to put in the hours of work to make the money to create some jobs (by hiring others to help me).

My current project?

Tell a friend. Save the economy.

7 Replies to “The Myth of the Unemployment Rate”

  1. “What use is it to measure how many people are dead weight?”

    I wouldn’t call the unemployed dead weight. Our economy is not so efficient that unemployment is a reliable signal of uselessness.

    “Because there’s no better way to measure (the economy)”

    You say that UE is the best way to measure the economy, and that it is useless. You are saying that ANY attempt to measure the economy is useless. Thats a big claim.

    “I get it (I’ve been there), there’s still no quick way (other than getting a job) to a reliable paycheck.”

    First of all, for many people, there is no quick way (including applying for a job) to a reliable paycheck. As of December 2013, there were about 3 unemployed Americans for every job vacancy (St. Louis Fed). Secondly, this comment seems to undermine your whole point that UE is useless. 8 out of 10 business fail within 18 months (Bloomberg).

    “the news cycle depends on reporting to make their money”

    Media coverage of macroeconomics is generally bogus, but the concern over unemployment is not just show. The unemployment rate (which is only meaningful in the context of lots of other metrics) is considered relevant by macroeconomists.

    And finally, here is what I think about the unemployment rate. Its a good indicator of suffering induced by macroeconomic factors. Your statements about how easy it is to make money show how privileged you are. You have time, skills, internet access, physical health, supportive social circles, social access to wealthy potential customers, maybe good credit, no criminal background, no drug or alcohol, a safe place to live. You are probably smarter and better educated than most people. Does lack of intelligence mean someone is to blame for their own poverty?

    Even if you forget the unemployed themselves, most of us have reason to care about the state of the labor market. We all get paid less when employers have a large reserve army of unemployed workers. We have less bargaining power when we seek jobs, so we are forced into unpaid internships.

    Why was unemployment so much lower in the 1990s than now? The data doesn’t indicate that unemployment is the result of fewer entrepreneurs starting businesses. The recession of 07-09 made unemployment spike. What caused the recession? We don’t really know, but it was lots of complicated factors that were out of the control of workers. “Let them eat internet” just won’t cut it.

    1. Kevin,

      Thanks for the very well-informed comments.

      First off, let me start by saying I certainly don’t claim to know everything (or even, really anything) about the intricacies of macroeconomics.

      I didn’t mean to insinuate that any measurement of the economy is useless, though. I think that’s a bit of a reach of a conclusion. Perhaps I should have phrased it more like “There’s no other simple metric that will draw clicks and eyeballs to measure the economy.” I’m sure there are better indicators of economic health that could be measured. They just won’t fit in a Buzzfeed headline or a Fox News scrolling ticker.

      I’ve actually written before about your point regarding poverty and my relative incorrectness there. But at the same time, the plummeting cost of internet connection in America (I pay 25 bucks a month for an internet connected phone with an HD camera that will more that satisfy my dream scenario of a youtube-based business) means that it is increasingly a problem of mindset and training, not opportunity. I get it (and I admitted it in the original post) that I am oversimplifying things. I’ll even concede that I might be doing so to a dangerous degree.

      I see this subtle “the poor little workers” thing going on in your argument, though. As though the workers are powerless to change their circumstance. I concede that I’m probably too far on the other end, but it’s also true that human dignity flourishes when people are made to “leave the cave, kill something, and drag it home.” Some people (I hesitate to posit a percentage, but suffice it to say a sizable chunk) need to be kicked off the government teet and out of the nest. They might be amazed to learn that they can indeed fly.

      In one of my most favorite Bible verses, Paul says “we urge you, brothers, admonish the idle, encourage the fainthearted, help the weak, be patient with them all.” The idle poor need patient, loving admonishment, not coddling.

      But the primary point I was seeking to make in this article is more an admonishing to those (like me, if I’m honest) who would lazily lean on those Fox News tickers to just gripe about the economy. Or make the economy into primarily a political campaign talking point. Instead, we should do something about it. Like create jobs, not wait on Obama to do so.

      1. Yeah so everyone should work according to their ability. But there are about 20 million people who claim to want full-time jobs and can’t get them. There aint enough job vacancies for even a quarter of them! Here is my question: what do we do about this? Entrepreneurship barely enters this discussion for me. 20 million people employed by brand new startups? Gimme a break! You can become employed only by getting a job or starting a business. There aren’t enough jobs to go around and achieving life-long financial security purely by starting your own business is a special accomplishment. The opportunity to work for a living does not exist for 100% of Americans!

        And now for a bit of intricacies. The “unemployment rate” (right now 10 million ppl) is intended to measure people who genuinely want to work. The metric you hear about on the news is collected through phone surveys, and has nothing to do with the process of getting unemployment benefits. You’re only included if you applied for a job in the past 4 weeks and say you want a job (and are therefore part of the “Labor Force”). There are going to be some benefit-scammers in there, and some who haven’t yet found their calling as sign twirlers and keep applying to NASA. Maybe some of them have latent Etsy skills that they are too lazy to capitalize on. But the idea is to measure involuntary unemployment, which is uncontroversially considered to be a thing, at least by economists and academics. And oh yeah, heres a big point: most of those 10 million will be “unemployed” for less than 27 weeks. They get jobs! So I’d say the unemployment rate you hear about is a different issue from the “idle poor” topic, which usually covers a different group of people.

        About the cave analogy. I have noticed that conservatives seem to think we live in that type of world, where individual choices about responsibility and hard work are the most important issues for survival. But we all depend on a complex and poorly understood globe-spanning network of relationships to keep us alive (or at least, not in caves). On the one hand, responsibility and hard work should always be our chief concern as workers. But we are also all at the mercy of the ups and downs of The Economy. It has real problems and the solutions don’t exist at the individual level. Some years lots of ppl get laid off and lots of businesses fail, and some years lots of ppl get hired and everybody feels wealthier, for reasons completely unconnected to almost every individual’s decision-making.

        So I guess our main disagreement is about economics and public discourse. Economic and political issues are inseparable. Its good to fret about The Economy to the extent that our voice matters in politics.

        I also have a bit to say about the topic you’re probably more interested in, which is the idle poor thing. Bootstraps rhetoric doesn’t resonate with me at all. I’ve been on cruise control my whole life. Being a straight, white, male, american, with college-educated parents is easy mode for life, so I can’t say much about the situation of people who don’t share my exorbitant privileges. My grandparents grew up on the sunny side of a police-enforced apartheid society! Cary kids break laws with impunity. I guess I just don’t buy it that you or Paul Ryan are authorities on the struggle to survive, Ben. Technology or whatever has not brought everyone out of actually having to fight just to survive, even in the US. I know people who have used social welfare programs. I think very few people are content in that type of situation.

        Guess what was going on in Parliament during the potato famine, where a bunch of people died? A bunch of politicians argued that giving aid to the Irish would encourage idleness. Same old stuff.

        I think economic situation has absolutely nothing to do with personal character. Not in any consistent pattern. And anyway, its the rich who can only get into heaven through a miracle!

    1. No worries. I really do appreciate the perspective. And as a born debater, I love the conversation. Best done in person with a beverage, but the interwebs will have to do for now. Thanks again.

Comments are closed.