Wonkbook: The real unemployment rate is 11 percent

at 07:51 AM ET, 12/12/2011

Typically, I try to tie the beginning of Wonkbook to the news. But today, the most important sentence isn't a report on something that just happened, but a fresh look at something that's been happening for the last three years. In particular, it's this sentence by the Financial Times' Ed Luce, who writes, "According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent."

Remember that the unemployment rate is not "how many people don't have jobs?", but "how many people don't have jobs and are actively looking for them?" Let's say you've been looking fruitlessly for five months and realize you've exhausted every job listing in your area. Discouraged, you stop looking, at least for the moment. According to the government, you're no longer unemployed. Congratulations?

Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That's millions of workers leaving the workforce, and it's not because they've become sick or old or infirm. It's because they can't find a job, and so they've stopped trying. That's where Luce's calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate -- the apples-to-apples unemployment rate -- is probably 11 percent. And the real un- and underemployed rate -- the so-called "U6" -- is near 20 percent.

There were some celebrations when the unemployment rate dropped last month. But much of that drop was people leaving the labor force. The surprising truth is that when the labor market really recovers, the unemployment rate will actually rise, albeit only temporarily, as discouraged workers start searching for jobs again.

Top stories

1) Congress is close to a spending deal, reports Rosalind Helderman: "Put this in the 'small accomplishments' category for an especially gridlocked Congress: It appears increasingly likely that, with little fuss, lawmakers will approve a bipartisan compromise in coming days that will keep government running past Friday, when a short-term funding measure that has kept the lights on expires. Partisan clashes have brought the government to the brink of a shutdown three times in the past year. But this time, appropriators from the House and Senate have been quietly working toward the unveiling, expected late Monday, of a compromise spending measure that would outline how government agencies should spend nearly $1 trillion through Sept. 30, 2012...It’s also helped that Congress agreed to an overall spending level for the year -- often the most contentious issue -- as part of the August debt deal."

2) The payroll tax cut may be financed through Fannie and Freddie, report Nick Timiraos and Alan Zibel: "Congress and the Obama administration are turning to an unlikely source to pay for the proposed extension of the payroll-tax cut: mortgage-finance giants Fannie Mae and Freddie Mac. The revenue source proposed by both Senate Democrats and House Republicans would boost fees that Fannie and Freddie collect from lenders. But that is raising hackles in the real-estate industry. Builders, Realtors and lenders say it would amount to a tax that would be passed on to mortgage borrowers. Fannie and Freddie don't issue mortgages, but instead buy them from lenders. They bundle those loans into securities that are sold to investors, and promise to make investors whole if the loans default. To cover any defaults, Fannie and Freddie charge 'guarantee' fees to lenders when they buy the loans."

3) Experts doubt Europe's deal is a real cure, write Steven Erlanger and Liz Alderman: "The deal on Friday in Brussels to reformulate the rules of the euro zone has probably saved the shared currency for now -- but there may be less to it than meets the eye. At least four major issues still need to be resolved: how much money is needed to protect Italy now from speculative attack; whether banks will stumble because of the crisis; the isolation of Britain, which does not belong to the euro zone; and not least, whether the Brussels cure, prescribed by Germany, fits the disease. With mounds of European debt due to be refinanced early next year, the crisis is far from over. 'More tests will obviously come, and soon,' perhaps as early as the opening of financial markets on Monday, said Joschka Fischer, the former German foreign minister."

4) The Durban climate conference ended in a deal, reports Juliet Eilperin: "Even as representatives from nearly 200 countries celebrated the last-minute compromise they fashioned at U.N. climate talks Sunday in Durban, South Africa, it became clear that its real-world outcome will be largely determined in Asia, rather than in Africa or the West. Broad in scope but short on details, the Durban Platform aims to break down the firewall that has divided the historic big emitters of greenhouse gases -- industrialized nations -- from the major developing countries whose emissions, scientists say, are now driving future climate change. The existing climate treaty, the Kyoto Protocol, did not require developing nations to reduce emissions. The Durban Platform starts a new process whose goal is to complete, by 2015, a global climate pact with legal force, applying to all nations. This will mean major developing nations will be required to make cuts."

Top op-eds

1) The US labor market may never fully recover, writes Edward Luce: "If there is an explanation as to why middle-class incomes have stagnated in the past generation, this is it: whatever jobs the US is able to create are in the least efficient sectors – the types that neither computers nor China have yet found a way of eliminating. That trend is starting to lap at the feet of more highly educated American workers. And, as the shift continues, higher-paying jobs are also increasingly at risk, argue Prof Spence and Ms Hlatshwayo. What, then, can be done to revitalise the increasingly sclerotic jobs market? If the answer were simple, it would have been on everyone’s lips a long time ago. Unfortunately, there is no precedent for the challenges America faces, and thus little consensus among economists or policymakers on the best remedies. However, almost everyone agrees on how to ensure the situation does not deteriorate."

2) We can learn from how doctors die, writes Ken Murray: "Doctors die, too. And they don’t die like the rest of us. What’s unusual about them is not how much treatment they get compared to most Americans, but how little. For all the time they spend fending off the deaths of others, they tend to be fairly serene when faced with death themselves. They know exactly what is going to happen, they know the choices, and they generally have access to any sort of medical care they could want. But they go gently.Of course, doctors don’t want to die; they want to live. But they know enough about modern medicine to know its limits. And they know enough about death to know what all people fear most: dying in pain, and dying alone. They’ve talked about this with their families. They want to be sure, when the time comes, that no heroic measures will happen--that they will never experience, during their last moments on earth, someone breaking their ribs in an attempt to resuscitate them with CPR (that’s what happens if CPR is done right)."

Wonkbook asks: Is this true? Do we have any good data on end-of-life spending for doctors? Or their medical directives?

3) The Euro crisis is a direct threat to democracy, writes Paul Krugman: "In at least one nation, Hungary, democratic institutions are being undermined as we speak. One of Hungary’s major parties, Jobbik, is a nightmare out of the 1930s: it’s anti-Roma (Gypsy), it’s anti-Semitic, and it even had a paramilitary arm. But the immediate threat comes from Fidesz, the governing center-right party. Fidesz won an overwhelming Parliamentary majority last year, at least partly for economic reasons; Hungary isn’t on the euro, but it suffered severely because of large-scale borrowing in foreign currencies and also, to be frank, thanks to mismanagement and corruption on the part of the then-governing left-liberal parties. Now Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power."

4) 2012 will be a year of muddling through, writes Barry Eichengreen: "Nowadays there is no shortage of pundits, economic or otherwise, warning of impending disaster. If right, they are hailed as seers; if wrong, chances are that no one will remember. So here’s a forecast: there will be no shortage of predictions that 2012 is shaping up as a disastrous year. My view is different: 2012 will not be a year of crisis, but nor will it bring an end to our current economic troubles. Rather, it will be a year of muddling through."

Choir interlude: They Might Be Giants and The AV Club play "Tubthumping" by Chumbawumba live.

Got tips, additions, or comments? E-mail me.

Still to come: The Fed may start forecasting its decisions as a matter of course; a Medicare doc fix may not pass in time; the defense spending bill is rife with earmarks; Durban negotiators reached a climate deal; and Ice Cube talks about architecture.

Economy

The Fed may start forecasting its decisions as a regular practice, reports Binyamin Appelbaum: "The Federal Reserve’s decision three years ago to reduce short-term interest rates to nearly zero made a splash, both because the Fed had never pushed rates so low and because it said that it planned to keep rates near zero 'for some time.' Predicting its own future actions was a new step, an experiment in a time of crisis that the Fed has since repeated several times, most recently in August, when it said that it planned to keep interest rates near zero until at least the summer of 2013. Now the technique looks increasingly likely to become a permanent method for influencing economic growth. When the Fed’s policy-making committee convenes on Tuesday, it will consider the idea of publishing a regular forecast of its future decisions on interest rates. Any such plan would most likely be announced no sooner than its next meeting, in January, when it is already scheduled to publish economic projections."

Fannie and Freddie's inspector general is getting aggressive, reports Nick Timiraos: "When Steve Linick first met senior managers at Fannie Mae and Freddie Mac early this year, he told them he would be no ordinary Washington regulator. His office has the power to make arrests, issue subpoenas and conduct searches, and some of his employees carry badges and guns. He hasn't hesitated to deploy those resources as the inspector general of the mortgage-finance companies' regulator, the Federal Housing Financing Agency. Mr. Linick, who is set to brief Congress on his oversight on Tuesday, has 48 investigations under way and dispatched federal agents to the homes of several Fannie employees in October as part of an investigation related to defaulted commercial mortgages. Fannie and Freddie were taken over by the government three years ago and have cost taxpayers nearly $151 billion since then."

<The era of "anything goes" mergers is finally over, writes Steven Pearlstein: "Maybe you’ve noticed that companies that are already at the top of their industries have become rather brazen about trying to increase their profits and share prices by buying up their nearest competitors. Who can blame them? For years now, the courts and regulators have turned a blind eye as industry after industry consolidates into two or three dominant firms...That 'anything goes' mentality took a hit recently when the Justice Department dared to challenge the purchase of T-Mobile by AT&T. Now its stepsister, the Federal Trade Commission, has the opportunity to definitively usher in a new era in antitrust by blocking the $29 billion merger between Express Scripts and Medco, two of the biggest pharmacy benefit managers -- the companies that handle the prescription drug portion of your health insurance."

Architecture interlude: Ice Cube examines the Eames House.

Health Care

A Medicare doc fix may not get passed in time, reports Lester Feder: "If Congress can’t finish its homework before it goes on recess, it might be able to get an extension -- but only if it’s willing to trim its winter break. At least, that’s the case with the “doc fix” -- a temporary change to Medicare’s troubled provider payment formula that Congress must pass to prevent a deep cut to physicians. They face a 27 percent payment cut that starts Jan. 1 unless Congress acts. But Jan. 1 isn’t a do-or-die deadline. The Centers for Medicare & Medicaid Services can buy Congress a little breathing room -- as it has done before -- by holding physician payments for a brief period in the new year if it looks as though Congress will move quickly to update the fee schedule. Just don’t expect it to be easy -- for either CMS or the doctors."

The Obama administration broke its promise on Plan B, writes Susan Wood: "It was a proud moment, in the East Room of the White House, on a beautiful spring day in March 2009. In the room were leading scientists, Nobel laureates, the president’s science adviser and heads of organizations that had fought in support of scientific integrity in research and in government. I was excited to have been invited to watch President Obama sign a memorandum on scientific integrity. The directive signaled that decisions about public health would no longer be blocked for reasons beyond scientific and medical evidence...That promise was betrayed this past week when Health and Human Services Secretary Kathleen Sebelius overruled the FDA commissioner -- and all of the physicians and scientists at the FDA -- in blocking the agency’s decision to allow an emergency contraceptive to be available over the counter for all who need it."

Domestic Policy

The defense spending bill has almost $1 billion in earmarks, reports Kimberly Kindy: "A six-month study of this year’s defense authorization bill has identified 115 spending proposals as earmarks worth $834 million, including 20 by Republican freshmen who campaigned against the pet projects, according to a copy of the report provided to The Washington Post. Sen. Claire McCaskill (D-Mo.), whose staff produced the study, called the behavior a “bold flaunting” of the GOP-led moratorium on earmarks. She chastised Republican House members for removing documents about earmarks from their Web sites that would have made it easier to identify the practice...In the analysis, McCaskill’s staff said it found 40 earmark requests from House Republicans and 75 from House Democrats, the report shows."

Federal spending cuts are endangering affordable housing projects, reports Debbie Cenziper: "Charlotte is a case study of a city facing the fallout of delayed affordable-housing projects promised to neighborhoods badly in need of new homes. Dozens of cities are in similar straits, trying to right troubled construction deals that failed to produce housing despite millions in HUD funding. Local housing officials will have to do it with less to spend: Congress last month cut the HOME program’s budget by $600 million -- nearly 38 percent -- citing mismanagement. Housing advocates criticized the move, estimating that the program will produce 31,000 fewer homes this fiscal year than in 2010...HUD officials declined to comment for this report. In the past, the agency has repeatedly defended the HOME program, saying that it has produced more than 1 million units of housing over two decades."

Lobbying has led to for-profit college rules being watered down, reports Eric Lichtblau: "Last year, the Obama administration vowed to stop for-profit colleges from luring students with false promises. In an opening volley that shook the $30 billion industry, officials proposed new restrictions to cut off the huge flow of federal aid to unfit programs. But after a ferocious response that administration officials called one of the most intense they had seen, the Education Department produced a much-weakened final plan that almost certainly will have far less impact as it goes into effect next year...'The haranguing had zero effect,' said Cass R. Sunstein, the White House official who oversees rule making. Rather, he and other administration officials said they listened to what they viewed as reasonable arguments and decided to narrow the scope of the original plan."

Everyone should be in favor of pushing government to work better, writes Robert Frank: "If government is inevitable, why not try to create the most effective one possible? Success requires focus and hard work, which in turn require dedicated and competent public servants. But experience shows that it’s possible. Annual surveys by Transparency International, a nonprofit group based in Berlin, consistently place the same nations -- New Zealand, the Netherlands, Switzerland, Canada and the Scandinavian countries among them -- atop the list of those whose own citizens think most highly of their governments. The United States does not rank in the top 20. Antigovernment rhetoric is surely not the only reason for our low ranking. But incessant government bashing isn’t making it any easier to recruit the kind of people who make good government, and short lines at the D.M.V., possible for the rest of us."

Gingrich gets it on immigration, writes Bill Keller: "The most scrupulous study I’ve seen of the economic impact of illegal immigration -- by Gordon Hanson, an economist at the University of California, San Diego -- weighed the costs to society (schools, health care, etc.) against the benefits (tax revenues, labor productivity, etc.) and concluded that the difference was 'close enough to zero to be essentially a wash.' The idea that illegal immigrants are dragging down the economy is just wrong...On major points Gingrich is consistent with the best proposals compiled by serious students of this subject, who aim to build a reform based not on what makes you feel good but on what’s best for the country...There are plenty of reasons the thought of President Newt Gingrich makes me shudder. But on this hard, defining American issue, he’s shown a combination of brains, heart and guts that puts the rest of his party to shame."

Adorable animals enjoying cinema interlude: The cat-only premiere of "Puss in Boots".

Energy

Animal welfare rules are hurting wind power, reports Ryan Tracy: "New federal rules on how wind-power operators must manage threats to wildlife could create another challenge for the fast-growing industry as it seeks more footholds in the U.S. energy landscape. The death of an endangered bat in September at a wind farm in Pennsylvania was the latest in a series of incidents that have caught the attention of regulators and conservation-minded scientists, who worry that large numbers of bats, bald eagles and other birds are being killed by wind turbines' spinning blades. In January, the U.S. Fish and Wildlife Service is set to publish new guidelines telling wind-farm operators how to measure the danger to wildlife at new sites and how to monitor existing sites. The guidelines are voluntary, but those who don't follow them are more likely to face fines or penalties if their turbines kill an animal protected by federal law."

The Nuclear Regulatory Commission's internal conflict has gone public, reports Matthew Wald: "Another chapter is out in the continuing and very public story of conflict within the Nuclear Regulatory Commission, which has now taken the form of a battle of snail mail. A letter addressed to the White House chief of staff and signed by four of the five commission members was circulated Friday criticizing the fifth member, Gregory B. Jaczko, its chairman, and expressing 'grave concerns' that his deficiencies as a leader could compromise nuclear safety. It was dated Oct. 13. A similar letter was sent directly to Dr. Jaczko. And this week, a rebuttal letter from Dr. Jaczko, also addressed to William M. Daley, President Obama’s chief of staff, said the other four members were improperly trying to involve themselves in management affairs, which in a reorganization of the commission in 1980 became the chairman’s sole responsibility."

Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

More from The Washington Post:

Pearlstein: End of anything goes era of antitrust?

21 reasons Gingrich won’t be the GOP nominee

Will Dodd-Frank prevent future bank bailouts?

 
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