By now, we have all heard Uncle Sam’s latest announcement of a “U3” unemployment rate at 9.4. percent. Inquisitive minds have also made note of the “U6” rate, which includes “discouraged” and “marginally attached” individuals and now stands at 16.4 percent, or an astounding one in every six workers. For some time now, we have been told by experts and authority figures that the rising jobless figures are nowhere near Great Depression levels—Ben Bernanke reassured us of this himself at a Congressional hearing last year.
Notwithstanding the obvious fact that we are only 18 months into this downturn, whereas employment took almost four years to crater during the Depression, what are we to make of such claims?
We know that the jobless figure applies only to what the Bureau of Labor Statistics considers to be the labor force. Anyone not in the labor force is neither “employed” nor “unemployed” for government purposes. This universe of statistical non-entities consists of over one million members of the active duty military, over two million prisoners, over ten million full-time college students, around 50 million retirees, and tens of millions more who are either permanently unable or unwilling to work—including those who have, sadly, given welfare a bad name by turning it into what could be seen as a lifestyle or career choice.
Going into the Depression, all of these groups were very small. Few people “retired” in the modern sense; most simply died on the job. (This is quite easy to do when you live and work on a farm, as did one third of the U.S. population at the time.) People also did not live as long—very few made it into their late seventies. The military and prison population were much smaller even in relative terms. Welfare as we know it today did not exist—the only people entitled to a check were disabled veterans.
Moreover, almost everyone over 18 (and in many cases much younger than that) was gainfully employed in full-time, adult fashion, as colleges had not yet expanded to become the youth warehouses and engines of socialization (i.e. teaching kids how to live without mom and dad) that they are now.
Hence the vast social, economic, and demographic changes of the last eighty years may have diminished the size of the U.S. labor force, relative to the population as a whole. So instead of comparing today’s unemployment stats with those of the Depression, why not look at what economists refer to as the rate of workforce participation?
Compared to the Depression, and relative to population size, we now seem to have a smaller productive sector supporting a larger non-productive sector—and this is the case even if, for the sake of argument, we consider today’s legions of bureaucrats, government contractors, lawyers, lobbyists, and nonprofit activists (all of whom consume and redistribute but do not produce wealth) as “productive” simply by virtue of holding a job. In other words, the baseline workforce participation rate, going into this current downturn, could well be substantially lower than it was at the start of the Depression.
Put another way, although we had 25 percent unemployment at the height of the Depression in 1933, at that time virtually every single adult male (and more than a few females) either had a job or was expected to be seeking one, and was thus counted in the labor force.
How would the figures look today if Uncle Sam determined the unemployment rate like he did back then? Well, we do not know for sure, because other recent trends—namely the higher workforce participation of females and the rising dependence on undocumented immigrant labor—have acted to obscure our comparison. Nonetheless, again, it seems likely that overall workforce participation is lower now than it was 80 years ago. (Keep in mind that even a five percent dip puts a huge additional strain on government finances and on those still working.)
It is therefore irresponsible and foolish to say that the employment picture is much better now than during the Depression. There is insufficient empirical evidence to support that claim. All we can say for sure is that fewer people now are forced to work—because the government is much better at redistributing wealth than it was back then—and that the burdens of feeding and housing all members of society are falling on an ever-diminishing share of the population.
Moreover, as the “U3” and “U6” figures continue to shoot upwards, we could find ourselves with an employment picture that is worse than anything this nation has ever experienced, no matter how carefully the “headline” figure is massaged, and no matter how many of the “discouraged” jobless, or of those “marginally” working a mere ten hours a week, are counted as employed—which statistical techniques were not, incidentally, even in use during the Depression! So much for official reassurances.
Disclosure: No positions relevant to this article.