Andrew Samwick at VoxBaby posted on unemployment rate “What the unemployment rate misses? “. This post obtained a relatively high visibility and was commented on by Angry Bear and Big Picture. I think that this approach is slightly biased and misleading . What we really need (to consider)is the driving force behind unemployment, not its measured level. Any current measure is far enough from some true one, if the latter does exist. In this blog, we devote enough time to modeling and prediction of unemployment in the USA and other developed countries. This is the reason to comment on the aforementioned posts and revisit our position to strenghten it with some new examples. Figures 2 and 3 do elaborate on the link between unemployment and the change rate of labor force using monthly estimates for both variables.
The figure presented by Vox Baby is a good illustration of the political thinking behind the post. Some people just want the unemployment level to be as large as possible. At first glance, all curves in the figure look similar. In that sense, having one of the definitions of unemployment is enouth to obtain all others – these definitions just represent different, but fixed, portions of some “true” unemployment. Theoretically, one can use any definition for economic study since they are equivalent.
Figure 1 compares unemployment rate and the ratio of the number of part time workers (for economic reasons) and the number of unemployed according to the BLS definition.
Politically, in the year of elections, Democrats like the upper extreme, and Republicans – the smallest possible value. If Dems will win, one could expect the next election will bring opposite situation in unemployment definition used.(Lightly edited for this post)
Update: Go to the Inflation USA site to view the full analysis.
If I understood this stuff better, I could comment better. Help the back of the class!