Yesterday I reminded everyone to check the U6 unemployment, which gives a better picture of the unemployment situation in this country. There’s another reason I forgot to mention, other than that it doesn’t ignore the chronically unemployed.
It’s being said that this is the worst unemployment in 26 years (which goes back to 1983). That’s true if one looks at the official rate over that period (BLS graph):
But the problem is, and I wish the old media would remember this, the official definition of unemployment changed in 1994, to exclude the chronically unemployed (who lack job opportunities in their area), which makes the situation look better. Not only does that mean that a slight decrease in unemployment does not automatically point to recovery (because people could just give up looking for a while and then be excluded), but it also means that the magnitude of the recession is ignored in media reports. Saying that this is the worst unemployment in only 26 years simply isn’t true. Using the U6 from 1994 to present and comparing that to the old official rate before 1994, which used roughly the same definition, we find that this is the highest unemployment since probably as far back as the Great Depression. This is probably the worst in 71 years.
The Bureau of Labor Statistics shows me only back to 1948, but between 1948 and 1994, the highest unemployment was in 1982, when it reached 10.8% unemployment. Compared to the present (U6) unemployment, 16.4%, it’s evident that you have to go back past 1948 to find a higher unemployment rate than now. So I’m pretty sure that means going all the way back to the Great Depression, when (if I recall correctly) unemployment reached 25% at one point. After a brief recovery, it climbed back to 19% or so in 1938.
But all that is obscured when the old media decides to ignore the 1994 definition change that artificially lowers the official unemployment rate by 7 points in the month of may.
This post originally appeared on Starboard Broadside.