Saturday, February 5, 2011

Unemployment: A Universal Underreported Problem

In the last few weeks we've all seen the images of violent protests in Tunisia, Egypt, and Yemen. Some pundits in the US have focused on fears that these uprisings are being driven by Islamic extremists somehow connected to the Islamic Brotherhood and by Al Qaeda's #2 Ayman al-Zawahiri (an Egyptian) or fears that it could turn into another radical Islamic state like Iran and threaten Israel.  A more paranoid theory of the uprising is given by Glenn Beck.

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Others with a more intimate knowledge of the region discount these fears (see Juan Cole's blog at Informed Comment and Robert Fisk's independent columns for better analyses than I can give).  One recurring factor throughout the Middle East that has driven these protests (as well as the international problem of illegal immigration) is certainly something we can sympathize with here in this country.  That is unemployment.  Even the head of the International Monetary Fund (hardly an economic radical who was removed over rape allegations) acknowledged that youth unemployment and economic inequality presented political dangers before the current troubles happened.

Here in the US, a confusing unemployment report was just released for the month of January where the official unemployment rate fell to 9.0% from 9.4% in December but only 36,000 jobs were created according to the US Labor Department.  This discrepancy has many TV and governmental economists scrambling to put the best possible face on these numbers for the public.  I think it is best to start with exactly how the US government defines unemployment and how it measures it each month.  I don't know how they calculate it in the Middle East.

You are officially included in the unemployment rate if you are unemployed and are looking for work. The rate is determined by a household survey of 60,000 where all members aged 16 and older are included and asked.  For the Labor Department's most recent report click here for a list of everything that was asked.   There is another little reported unemployment rate that includes "marginally attached to the labor force, plustotal employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force ."  Marginally attached means "those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work."  Part time for economic reasons (like myself) include those who want to work full time but have to settle for part-time.  This current rate is 16.1% for Jan 2011 down from 16.7% in  Dec 2010.  It was 18.0% in Jan 2010.  It could be argued that this is a less biased unemployment statistic.

The estimate of 36,000 jobs gained in January comes from a monthly survey of 160,000 employers about their payrolls.  This survey is summarized in the same report as the household survey.  The Secretary of Labor tried to spin this as good news as employers usually let workers go after the Christmas Holiday.  The discrepancy is harder to explain.  The trend will have to be followed over several months.


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The 36,000 job gain estimate from January 2011 was revised upward to 63,000 along with a gain of 192,000 in February.  These increased job gain numbers seem to be more in tune with the decrease in the unemployment rate from 9.4% to 9.0% in Jan to 8.9% in Feb.  There may have been irregularities in the sampling for the employment survey last month.  The rate which includes underemployed and discouraged workers also decreased from 16.1% to 15.9% in Feb.  This is good news and future months will tell if this is a trend.

All the new governments in the Middle East will have to manage this problem just as every other.

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