Andy Harless

Job Losses Are Not the Problem

What is the “true” unemployment rate? (It’s a bit of a tangent, but since a few people have mentioned it, I thought I would address this.) I don’t think there is any “true” unemployment rate. There are a number of different possible ways of defining “unemployment.” One is not more “true” than another. Having an argument about what is the “true” unemployment rate is like having an argument about whether soccer or American football is the “true” football. You could have a reasonable argument about which is a better game, and similarly, you could have a reasonable argument about which is a more useful definition for unemployment, but it doesn’t mean that people who define it differently are lying.

Unemployment by the broadest definition has always been higher than the unemployment by the “official” definition. The difference is larger now than in the past, mainly because an unusually large number of people are working part-time that would prefer to be working full-time. These people don’t count as unemployed under the official definition, because they actually are employed, just not as employed as they want to be. So it is probably true that the official unemployment rate is giving an overly optimistic reading, compared to what a similar reading would have meant 25 years ago. This is not the result of some kind of conspiracy; it’s just that times change, and some measures don’t have quite the same implications as they did in the past.

I use the official definition for convenience, so that I won’t have to explain why I’m using a different definition. I don’t think it would affect my argument much overall if I took into account the “underemployed.” On the one hand, there are jobs that switched from full-time to part-time, and these might be considered “shadow job losses” that I’m ignoring, so maybe job losses are more of a problem than I’ve said. On the other hand, a significant fraction of the new jobs being created are probably part-time jobs, so arguably they shouldn’t be included in job creation: in that respect I’m understating my case that lack of job creation is the main problem.