Unemployment is down - is that good or bad? (econ102)

http://www.cepr.net/index.php/data-bytes/jobs-bytes/jobs-2013-10

Comments

[Matt_Kiser]

This goes back to the exogenous vs endogenous variables. While unemployment went down, which is good, the variables behind this change do not seem very positive. The article notes this by saying "the economy had slowed in the third quarter." To harm the outlook of the economy even more they noted that "This is before any negative effects of the shutdown." In addition the positive changes from september's report were simply reversals of this summer's job loss except for a few anomalies (such as government education). They also showed that while job growth is positive it was less than it has been for a year. And much of the decrease in unemployment rate is due to people leaving the job market, which is not really a decrease in the unemployment rate.

[Syed Ali]

I have to agree with Matt. The article seems to be pointing out that although unemployment decreased modestly, the percentage drop in unemployment is less than last year. Furthermore, because the employment-to-population (EPOP) rate also decreased, some of this observed decrease in unemployment might simply be because people have grown frustrated and have chosen to cease their job search. As we discussed in class, % unemployment is calculated from the number of people actively looking for work - even though some people might desire employment, they will not be included in % unemployment if they are not actively seeking it.

However, I was also wondering if the decrease in EPOP rate might partly be due to people choosing to return to school, for further undergraduate or graduate study. As we talked about in class, due to the stagnant economy, the government is currently seeking to incentivize borrowing by keeping the interest rate artificially low. As many people use loans to pay for schooling, and as the effective interest rate is so low, more people might now view returning to school to pursue further graduate coursework as economically favorable. That is, for more people, the return on investment from returning to school will equal or exceed the opportunity cost of doing so, due to lowered interest rates. These people would be pursuing investment spending, as they are investing in their human capital. Through this investment, they can improve their employment opportunities in the future, and contribute to positive economic growth over time.

Although this is a tenuous hypothesis, if true, it would appear that the government is achieving its goal of promoting investment spending; furthermore, the economy might be improving at a rate greater than indicated solely by employment metrics, as human capital investment is a contributor to GDP growth.

[Maddie Kosar]

Syed brings up an interesting theory about the choice to leave the labor force in order to obtain another degree. This is definitely a viable hypothesis that can account for some of the decrease in EPOP, but due to the state of our slow changing economic status, it is still very likely that discouraged workers have just left the labor force. Since the biggest drop was in the group with no high school degree, it is a good thought to guess that they may just have gone back to school.
We must also consider, however, the amount of people that are underemployed as well as unemployed. Sometimes when we focus too much on the unemployment rate, we overlook the problem of underemployment. If this article also included the change average household income for each group, it would be much easier to analyze how this decrease in unemployment is truly helping the families.

[Kasey Canon]

Although unemployment rates have decreased, this article does not seem very positive. Because the employment-to-population rate has decreased, some of the decrease in the overall unemployment rate is due to people simply leaving the workforce. The article explains that "workers with less than a high school degree were the big winners in September with a drop of a full percentage point in their unemployment." As Syed mentions, I wonder if this decrease could simply be a result of people going back to school in order increase their education. Furthermore, as discussed in class, the unemployment rate only includes those who are actively looking for jobs. Therefore, the unemployment rate might have decreased because people gave up on looking for employment. As Maddie discusses, the article does not consider the underemployed. I would be interested to see the rate for underemployed as well as those unemployed.

[Krysta Huber]

I strongly agree with Syed's question about whether the change in unemployment rate is a result of individuals choosing to go back to school. Because the data for this article points particularly to those with less than a high school degree, I think that there's a natural inclination question whether these people made the decision to go back to school. As everyone else has mentioned, they are then not calculated in the unemployment rate as students and because they may not actively be seeking work. The rate could have easily decreased because these people traded the act of searching for a job with schooling, or even job training - maybe they took on some form of unpaid internship. I feel that this article would have been more interesting had there been a comparison between different education levels. If it looked at changes in unemployment for those eligible for jobs with high school degrees versus those with some form of higher level education (4 year university, votechnical training, etc.) and then compared the two, we could understand how levels of education are impacting the unemployment at this time.

[pj cline]

It seems that the decreasing unemployment rate, for people with less than a high school degree, signifies businesses looking for cheap unskilled labor. Any decrease in unemployment is good, but this situation is not ideal. If unskilled laborers are working they are not likely going to school to improve their skill set. In the short-run this is good for the economy, but in the long-run our economy will need skilled laborers to grow.

Matt also brings up a good point regarding our nation's unemployment rate. Specifically, that it can be misleading if it only decreases because people stopped looking for jobs, and therefore exit the workforce. Our country needs to create incentives for businesses to bring in more workers. Maybe tax ride offs for businesses who hire a set amount of people? Just an idea obviously, but I believe that people need to look at what the economy should be 10 to 20 years from now. There are no quick fixes we need actual investments that will be stable, like in human capital and education.

[Katie Barnes]

I think that the possibility of people choosing to invest in their education is a good question to rise. However, wouldn't we see a correlating increase in college applications, high school enrollment rates, etc.? I understand that it may be too soon to see any of these results now, but in the future we will be able to use data to see if this is a reason why the unemployment rate decreases. I also think that the fact that the article focuses on 'less than a high school degree' is relevant, but not a key demographic to focus on. The US census reports that 85.3% or more of people in the United States are high school graduates or have further education, so this article is only considering less than 15% or less of the population. These numbers only increase over the decades, so a decrease now would be strange. The EPOP is another mode of measuring unemployment that is more straightforward in this article because it states that the EPOP has not changed, and therefore the decrease in unemployment is due to individuals leaving the labor market.

[Sam Sheppard]

I do agree with the previous comments that the drop in unemployment rate could most likely be from people leaving the workforce in general. What struck me most is that this article contains mostly positive statistics but then reenforcing with negative counterexamples. I do believe that although slow, the lower unemployment rate is a positive quality, showing that people could either be going back to gain an education or have been hired from the new jobs recently available.

[Lizz Platt]

On the surface, the decrease in unemployment rate appears to be a good thing. But this statistic should not be the only factor examined. The unemployment rate for workers with less than a high school degree dropped to 10.3%. This statistic could show, as others have stated, that more people are choosing to invest in their education rather than entering the workforce. The article also states that this could be due to the fact that the population is aging and many older workers tend lack a high school degree.

Another factor that should be considered with this statistic is how it will affect society in the future. Students on the brink of dropping out of high school could interpret this drop in unemployment rate as a reason to enter the workforce. If they believe the chances of a job are greater for those without a high school diploma, they may choose to see school as a waste and leave. However, this is not the case. Individuals choosing to make this decision will have greater chances of living in poverty and society as a whole will not see an increase in human capital. Education leads to greater human capital and possibilities for expansion in the economy. Thus, a decrease in unemployment for workers with less than a high school degree benefits the economy in the short run, but has the opportunity to harm it in the long run.

[Mitchell Brister]

What I find interesting about this article is the information that can be presented to spin any kind of story you want. You could spin this to say that the economy is heading in the right direction and doing better than it was. You just show the decrease in unemployment. To show the other side you also explain the EPOP rate and how the decrease in unemployment isn't as great as it seems. What is scary about this is that when a politician is talking to the average American, he is absolutely going to only show the information that makes him or her look good. This is why it is so important to try to get the whole story through research. Sometimes this is extremely difficult and this alarming fact is what struck me from the article.

[Aaron DiGregorio]

I agree with Mitchell’s comments in that this information can be presented in a variety of ways depending on what a given author wants to argue. On the one hand, unemployment figures are down, which would typically represent a growing economy with new job creation. On the other hand, the data shows that the unemployment growth isn’t all that it’s cut out to be as a significant portion of the population simple left the workforce, thus causing the unemployment figures to drop. This varying way to look at a given situation can be extremely detrimental to a society, given that policy makers choose may to present this data in the way which benefits their own personal interests.

[Emily Utter]

I believe this article shows how unfairly the Labor Department judges what is unemployment and who is unemployed. People who are quitting the labor force, whether it be for unfair demands by their boss or poor hourly wages, are not considered unemployed even though at the moment they are unemployed. There are many other things the Labor Department does to cut people out of the unemployed group and to then make their numbers seem lower than they actually are. Therefore when just given the numbers the Labor Department puts out, one cannot exactly tell if the unemployment went down due to job creation and better jobs, or if people stopped looking for jobs out a frustration (another way the Labor Department cuts down unemployment). Therefore from this article I don't think I can positively say whether or not unemployment going down is good or bad.

[Jacob Strauss]

Katie is correct in that people with education level of less than a high school degree make up a (relatively) small portion of the population, but I do not believe that means the article should have spent less time on the demographic. The change in unemployment in this group reveals changes in our society as a whole. More and more people are attaining a high school diploma or more, but this development is of course occurring among the younger part of the population. The large reduction in the unemployment for this demographic could indicate that older, less educated workers are being phased out of the work force. The author's hypothesis for explaining the drop makes the decrease less positive, but is also optimistic because it shows the US workforce is slowly becoming more educated.

Syed's point is intriguing, but workers returning to school cannot explain the drop in the EPOP, as he stated, since the EPOP did not change during the month of September. Instead, "it remained unchanged at 58.6%" The increase in students could explain the drop in unemployment for those without a high school degree, but it seems to me that it is more likely that older workers are being phased out of the workforce. Only time will show what ultimately caused the drop.

Some students alluded to other statistics, such as the number of workers who are underemployed, and it is interesting that these were not mentioned. This issue has been gaining media attention lately because Republicans are asserting that the Affordable Care Act will increase the number of part time workers. The Bureau of Labor report shows that the number of part time workers who wish to be full time remains unchanged at 7.9 million, and that 9 out of the last 10 jobs added to the economy were full time. This is positive news, and hopefully over the coming months as businesses adjust to the ACA it will not change.

[Jean Turlington]

This article gave some intriguing statistics about unemployment. It seems to be increasing but not at a speed that is considered acceptable by the author. I think one of the most interesting comments in the article was the idea that the economy has slowed during the third quarter and "this is before any negative affects of the government shutdown." The government shutdown had many unintentional affects and I think a slight slowdown of the economy and therefore a related increase in unemployment are two significant consequence. We should definitely look and see how these play out in the long run. Maybe use what happens as an important factor that politicians should consider when faced with the possibility of another government shutdown.

In response to Jacob I agree that it is fine to put an emphasis on people with less than a high school education and their employment status. This although maybe a smaller area is still an important area. If we could get people with less education to have jobs and/or get those same people to get higher levels of education that could be a definite step in the right direction. We could be very optimistic about the future if such things happened. On a different note there are many components that play into unemployment statistics and the underemployed is a group that should be looked at more. Like Jacob says it is acceptable that the number of underemployed has not increased but there is no telling what will happen in the future with this and the Affordable Care Act. Also it would be better if the number of underemployed went down instead of stayed constant.

[Kelsey Richardson]

I agree with Kasey that although the unemployment rate went down, it was interesting to me that the article did not seem very positive. Even though the unemployment rate dropped, the EPOP rate shows that the decrease may not be as great as it may originally seem. I thought this article did a great job of being wary of the decrease in the unemployment rate and of analyzing other statistics and potential causes for them. The author covered his bases by representing agreeing and opposing angles. However, I do agree with Mitchell that it is a concerning example of how any of the given statistics could be used on their own to give just about any story that a person could wish about unemployment—and that statistics in general that are given out of context or without comparison could give a skewed reflection of the actual state of an economy. This reiterates the importance of informed opinions and decisions when it comes to economics and how there is always more to be considered than what is presented to you by one source.