Tag Archives: national rate

Forget About the Unemployment Rate Altogether

The unemployment rate might be the most looked at and talked about figure in the United States when it comes to the economy. If not the absolute most, it is certainly up there. And for what reason? The national unemployment rate is some overall number that is supposed to somehow represent the condition of our economy in general. Yet, this is not realistic because the economic conditions are different in so many places around the country, and are different among so many different groups and partitions of the population. What’s more is that even the individual unemployment rates among various locations and various groups of people don’t always tell the whole story. Let’s start with my first point, though.

The unemployment rate can be an extremely misleading figure depending on what you really care about. What really matters may be a specific location in the US, or a specific age group, or a particular race or gender, or maybe a combination of several of these characteristics. The following sequence of statistics compliments this idea exactly.

If you are a college-educated woman, your unemployment rate is less than 4%. If you are an African-American male with a high-school diploma or less, the rate is well into the mid-20s, and it is in the teens for Hispanics at that education level. If you live in Nebraska or North Dakota, there has been no unemployment crisis in the past five years, and the rate has consistently stayed below 5%. If you live in the areas hit hardest by the bursting of the housing bubble—Central California, Greater Phoenix, Las Vegas, vast swaths of Florida—or the areas decimated by the woes of the auto industry, the unemployment rate has frequently been above 10%.

If we’re even going to consider the unemployment rate at all, it should only be for specific locations or groups of people, or some combination. Seeing the national unemployment rate of 6.6% currently does not tell you anything about the percentages laid out above. The unemployment rate may have been useful from the time it was created (around the time of the Great Depression) up through the mid-1900s, but now that there is so much data out there, we must pay more attention to the details as opposed to this overall average. In order to stimulate the economy and continue to emerge from the Great Recession (and hopefully start to emerge at a quicker pace), policies need to be targeted at the groups who need the most help, as opposed to targeting the nation as a whole. Most of the issues that exist are localized, whether physically, or within a specific group of people broken out by age, race, or gender. National policies are not nearly as effective as localized, targeted ones would be.

Hari Sreenivasan and Nela Richardson take a step in the right direction in an interview on PBS. They discuss the unemployment rates among minorities and young people specifically, as opposed to the national figure. Something astounding that gets pointed out is that the unemployment rate is essentially double among African Americans compared to White Americans at every level of education (approximately 12% to 6% overall). A big cause of this is related to college education and “the fact that… blacks graduate at lower levels than white students do.” However, some of the age ranges that they use may not be the most significant as they include a range of ages 16-19 and the differences in the unemployment rates. Also, they completely ignore the labor force participation rate in this discussion, which brings me to my second point that the unemployment rate never tells the whole story.

While the difference in unemployment rates among white people and black people is startling, when you take the labor force participation rate into account, it is not as ridiculous of a spread. The LFPR among whites fell 2.2% whereas the LFPR among blacks fell slightly less at about 1.8% between Q1 2010 and Q4 2013. This means that more White Americans simply stopped working or looking for work, while comparatively more African Americans continued to work or search for work. Of course this affects the calculations of their respective unemployment rates (decreasing that for White Americans more than for African Americans).

In the end, I believe that we should, at the very least, disregard the national unemployment rate altogether. It can be the most misleading figure we look at each and every day and should not be considered valuable any longer.