Sense on Cents

What is the real rate of unemployment?

The traditional rate of unemployment, commonly regarded as the U-3, is currently 10%.

Very often, though, we hear reference to the underemployment rate, that is the U-6 rate. The U-6 rate currently sits at 17.3%. This measure encompasses those individuals who desire more hours, are working below their skill set, or are discouraged and have exited the labor pool.

Thanks to SG, I was introduced today to a noted economist who has been tracking an even more encompassing measure of unemployment. Who is this individual? John Williams who operates Shadow Government Statistics.

Walter J. “John” Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies.

Williams has developed an even more comprehensive measure of unemployment, known as the SGS Alternate. What does this include?

The SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.

Not exactly a pretty picture when we incorporate all the short-term and long-term components. An unemployment rate of 22% is eerily reminiscent of the 1930s.

LD

This entry was posted on Friday, January 8th, 2010 at 3:15 PM and is filed under General, Unemployment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.