02 February 2017

In Our Occasional Series of Stopped Clock Reports………

It looks like the Trump Administration is considering switching from U-3 to U-5 as its official unemployment rate.

This will serve to give a more accurate read on real unemployment in the US:
If President Donald Trump gets his way, the U.S. unemployment rate could jump to 5.7% from 4.7% overnight.

No, it’s not because the president plans to throw a bunch of people out of work. The White House reportedly might designate a different unemployment rate as the official one instead of the figure that’s been in use since World War Two. [Actually, this is not true:  The military was added to the labor force in the Reagan recession to keep the number below 10%] That’s according to a report in the Washington Examiner.

Switching to a different and higher unemployment rate would suggest the labor market is not as sound as it appears, ostensibly putting more pressure on Washington to take action to improve job creation. At least that’s the theory.

Such a change would not be hard technically. The Labor Department already calculates six unemployment rates, known by the designations U1 through U6.
We have been understating the unemployment rate for years, and it's one of the reason that European figures are higher.

If implemented, this would be a welcome change.


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