Tags: Joe Biden | Jared Bernstein | unemployment | jobless rate | economy

Economist: Unemployment Rate Worse Than Figures Show

By    |   Thursday, 02 October 2014 12:46 PM

Leading economist Jared Bernstein has warned that the current jobless rate does not reflect the real extent of "the slack in the economy" or the true unemployment picture.

Bernstein, former chief economist to Vice President Joe Biden, says in a column for The New York Times that last month’s rate at 6.1 percent is close to what many economists consider to be "consistent" with full employment, about 5.5 percent.

But in his "Today’s Economist" piece in "The Upshot" section of the paper, Bernstein explained that Americans should not be fooled by these seemingly low unemployment numbers.

He said that economists who attended a conference held last week by the Peterson Institute for International Economics came to the conclusion "that there’s considerable slack, in terms of underutilized resources, in the American economy in general and the labor market in particular."

"There are at least two special factors that are distorting the unemployment rate’s signal," Bernstein wrote "First, there are over seven million involuntary part-time workers, almost 5 percent of the labor force, who want, but can’t find, full-time jobs.

"That’s still up two percentage points from its pre-recession trough. Importantly, the unemployment rate doesn’t capture this dimension of slack at all — as far as it’s concerned, you’re either working or not. Hours of work don’t come into it."

Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington, pointed out that the second special factor "masking the extent of slack as measured by unemployment" concerns actual participation in the labor force.

"Once you give up looking for work, you’re no longer counted in the unemployment rate, so if a bunch of people exit the labor force because of the very slack we’re trying to measure, it artificially lowers unemployment, making a weak labor market look better.

"That’s certainly happened over the recession and throughout the recovery, but it’s been mixed in with a more benign source of labor force exits: the retirement of aging baby boomers."

Bernstein, who was an adviser to Biden from 2009-2011, added, "There’s more slack in the American job market than you’d glean from the unemployment rate alone. Moreover, some of those who’ve left the labor market would come back if the jobs were there."

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Leading economist Jared Bernstein has warned that the current jobless rate does not reflect the real extent of the slack in the economy or the true unemployment picture.
Jared Bernstein, unemployment, jobless rate, economy
Thursday, 02 October 2014 12:46 PM
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