Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Unemployment: How Do We Measure A Shortage Of Work?

Economics / US Economy Jan 23, 2009 - 06:16 AM GMT

By: Ronald_R_Cooke

Economics Best Financial Markets Analysis ArticleA Modest Proposal - According to the U. S. Department of Labor (DOL), employers cut 524,000 jobs in December, 2008. The seasonally adjusted unemployment rate increased to 7.2%. That’s bad news for a struggling economy. Unemployed people have fewer spending options. They tend to buy only what they absolutely need. Food tops the list. Rent or mortgage payments come next. Then utility bills, emergency medical expenses, and money for transportation – most likely in the form of car or truck payments and fuel. Purchases of clothing, a new car, electronics, toys, and so on can be deferred. Savings erode all too quickly. Personal confidence ebbs. Family life is strained.

But December’s unemployment numbers do not tell the whole story. It would appear the unemployment rate could exceed 10% before the end of 2009. And although media reporters and pundits like to focus on the unemployment rate as a benchmark for how bad things are, they are ignoring a far more important number.

Total unemployment plus under-employment.

Call it the Work Shortage Index (WSI).

Why is this number important? Aside from its use as a measure of human misery, it also gives us an indication of how many consumers are being forced to curtail their spending. The DOL attempts to provide an alternative measure of labor under-utilization in Table A-12, U-6. For December, 2008 “Total Unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force, plus all marginally attached workers was 13.5%”. If my math is correct: A total labor force of 154,349,000 persons X 13.5% = 20,837,000 “under-utilized” workers. From their point of view, there is a shortage of work.

I did my own WSI estimate. I wanted to know how many people were either unemployed or under-employed, wanted to work, and were available for work.* From a cultural perspective, these people – and their families – are experiencing a growing sense of personal tension that inevitably leads to frustration and anger. Historically, that has frequently led to momentous social change. In terms of economics, these people are not making enough money to sustain their potential (or usual) rate of consumption. In our current economy, the decline of consumer spending power is contributing to fixed asset depreciation, corporate contraction, and lower GDP.

Using DOL/BLS* A Table data, we start with a total labor force (age 16 or older) of 154,349,000 workers. Of this number:

9,468,000 are looking for full time work

1,531,000 are looking for part time work

That gives us a total unemployment figure of 10,999,000, or 7.1 %.

To this we add:

· 1,200,000 estimated number of people who have become discouraged and are no longer looking for work, or have been unable to find a job they able to take;

· 3,186,000 estimated number of people who usually work full time, but are working part time because they can not find full time employment;

· 1,562,000 estimated number of people who are working part time, but would like to find a full time job;

· 829,000 estimated number of self-employed persons who left the labor force in 2008 because they could not find work;

· 5,711,000 estimated number of self-employed persons who are unable to find enough work to keep them employed on a full time basis.

That gives a total of 23,487,000 unemployed or under-employed persons, and a Work Shortage Index of 15.2%.

Think about it. That’s over 23 million people, and their families, whose financial wellbeing has been restricted by a shortage of work. Worse, the longer the recession - the higher this index. As the recession drags on, employers tend to schedule fewer hours of work, place additional workers on part time employment, and find ways to eliminate jobs. Self-employed persons find it increasingly difficult to find productive work. And another key point: Under-employment increases faster than unemployment as earning power erodes.

If unemployment climbs above 10% in 2009, we can expect the Work Shortage Index to exceed 21.9%. Over 33.5 million Americans would be forced to sharply curtail their spending. Over 27% of all American households would be in financial trouble. Not only would that curtail consumer spending, it would also prolong our existing housing crisis and extend the depth of our existing financial crisis.

Counting noses to determine employment status is certainly useful. That’s the methodology used by the DOL/BLS to collect the unemployment data usually quoted by the media. But if we want to measure the economic impact of restricted spending, we need to find out how many hours people are actually working for money. For example, one may be tallied as being self-employed, but that in no way tells us if a self-employed person is actually making any money. Think of all the independent real estate agents, contractors, carpenters, electricians, health care workers – and so on, who are unable to find enough work that pays hard money.

These people are under-employed.


We can have a lively discussion about my methodology, but the basic thesis will not change. If we want to measure how a shortage of work impacts our economy, we should take a look at adding under-employment statistics to unemployment data.

*All data is from the January 2009 DOL/Bureau of Labor Statistics A tables, which are not corrected for seasonality

Ronald R. Cooke
The Cultural Economist
Author:  Detensive Nation

Cultural economics is the study of how we interact with economic events and conditions. Culture, in this sense, includes our political systems, religious beliefs, psychology, history, customs, arts, sciences, and education. The term "Economics" refers to the extent and process of how we employ capital, labor and materials. If human existence is dynamic, then economics – as a science – must be able to characterize the interaction of culture and economics in contemporaneous terms.

Ronald R Cooke Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in