Monday, May 11, 2009

On The Margin: Total Unemployment April 2009

The most recent Employment Situation report showed that in April “total unemployment” continued its ascent and now stands at 15.8% of the civilian population or 37.17 million people.

Notice that while the latest results indicate a deceleration of the increase of the total unemployment rate and arguably the first significant pullback in the spread between the “total” and “traditional” rates, it will take several more months to determine if this is a trend or a momentary pause.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit qualification of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Below is a chart (click for larger version) showing the “total” unemployment rate versus the “traditional” unemployment rate along with the year-over-year percent change to the “total” unemployment rate.

Notice that the “total” unemployment rate has been skyrocketing as of late showing a 71.74% year-over-year increase and reaching the highest level seen since the government began tracking the many measures of marginalized workers while the spread between the “traditional” and “total” unemployment rates stands at 6.9%.

The chart below (click for larger) calculates the spread between the “total” unemployment rate and the “traditional” unemployment rate.