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Jun 21 2010   3:20PM GMT

Strange Phenomena Can Sometimes Skew Employment Numbers

Ed Tittel Ed Tittel Profile: Ed Tittel

The June12th-18th 2010 issue of The Economist includes an interesting story entitled “Unemployment Insurance: Extension Deficit Disorder” that makes a very interesting point about upcoming unemployment figures from the US Bureau of Labor Statistics. With repeated extensions to unemployment benefits, lots of people are still being counted as unemployed in the US economy right now, even though they’ve been out of work for six or even twelve months. Most “normal” metrics stop counting the unemployed when benefits run out, usually by 27 weeks, but with recent extensions and stimulus allocations, the counting period has stretched out considerably. Their chart shows what this means in contrasting shades of blue, appropriately enough unemployment being a generally unpleasant affair for all parties concerned.
When estensions run out, unemployment figures will drop

When estensions run out, unemployment figures will drop

As the light blue region above the medium-blue area at the bottom of the figure illustrates, individuals on “emergency benefits” for unemployment make up just over half of the counted population right now, while those on extended benefits (the dark areas at the top or middle of the right-hand side: I’m not exactly sure…) occupy a much smaller chunk of that group. What this tells me is that with extended and emergency benefits bound to run out sooner or later, at the whim of an increasingly debt-shy Congress, those parts of the chart are bound to get cut off at some point in time.

Inevitably, this will lead to a reduction in unemployment counts. I just hope it doesn’t get reported as an improvement in the employment situation — as the graph clearly indicates, there are lots of people who are both unemployed and likely to be redacted from measures of unemployment at some time in the future. Cutting them out of a measured population doesn’t imply any improvement in the overall situation, though — it just means the ranks of the long-term unemployed and so-called “discouraged workers” won’t be included in upcoming BLS unemployment measures.

For my part, I’m hoping the economy will move from the current state of “jobless recovery” to one that involves actual job creation, so that all portions of the curve in this blog’s illustration can be whittled away at, whether the BLS continues to measure them or not!

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