If you think the latest federal unemployment numbers — a November rate of 7.7 percent, the lowest in 46 months — represent good news, Gene Epstein of Barron’s offers an alternative perspective in his latest “Economic Beat” column.
Over the past three months, monthly private-sector job increases have averaged 153,000, a marked slowdown from the first quarter of this year, when the average ran 226,000. At monthly gains of 153,000, it would take until December 2014 for private employment to climb back to its January 2008 peak. That would mean that 83 months would pass before private employment exceeded its previous peak, the slowest rate of jobs recovery by far in the post-World War II era.
The sluggish performance is even more dispiriting when we consider that Sandy probably placed little drag on recent gains. As Michael Lewis, president of Free Market Inc., points out, from the standpoint of the jobs data, Sandy was “a perfect storm,” in the sense that it hit after the October survey was completed and before the November survey was begun.
THIS BRINGS US TO THE OFFICIAL unemployment rate, which declined to 7.7% in November, a 46-month low. There’s a problem with that reading: It’s belied by another measure of joblessness kept by the BLS that has not done as well.
The bureau keeps six measures of joblessness — referred to as “measures of labor underutilization” — “U-1” through “U-6,” of which the official unemployment rate is U-3. Most of the time, trends in the other five measures pretty much track the trend in U-3, which means they convey no information that can’t be found in U-3. But the past three months are an exception.
Take the broadest measure of underutilization, U-6. While U-3, the official rate, includes only jobless folks older than 16 who have looked for work over the past four weeks, U-6 adds two other categories. The first is the “marginally attached” — people who haven’t looked for employment over the past four weeks, but have done so over the past 12 months. The second added category consists of the involuntary part-timers — people who work part-time, but are searching for full-time positions.
Now, against a 7.7% U-3 in November, U-6 was 14.4%. But since any single month can be volatile, it’s more meaningful to note that, over the past three months, U-3 has averaged 7.8% and U-6, 14.6%. And according to the historical trends, U-6 is telling us that labor underutilization is a worse problem than implied by U-3.