Saturday, July 31, 2010

Unemployment map: The geography of a recession

Urgent review needed.

Having been unplugged for a few weeks, it is time to respond to some questions and comments. First up: Is this a true picture of Unemployment or an Internet slam/scam on the recent failures of Obama and others? I would be interested in hearing your thoughts.


Take a look at this map. It shows how the unemployment rate has changed over the past several months. When you get to the map, click the arrow in the middle and watch how things changed. Incredible what "The Great Recession" has done. The old saying, "A picture is worth a thousand words" is never more true than looking at this map. Viewing it only takes a few seconds. The darker the color, the higher the unemployment. 2009 has been BRUTAL. Unemployment Rates by County--January, 2007, approximately one year before the start of the recession -- to the most recent unemployment data available today (May, 2010).

It is an accurate picture of one of the unemployment rates, and worth viewing. However, there are numerous ways to measure unemployment. The particular one used for the mapping is not particularly meaningful. That said, the one selected doesn't matter too much for a broad brush overview of the geographic spread of the recession.

The unemployment rate used does introduce some "bias" in the time dimension. There is a slight bias toward greater absolute change and a lag in timing when this particular unemployment rate is used.

To understand the issues consider those who “want to work but have given up looking.” Giving up on job seeking should take time, thus the built-in lag. Add in the subjective nature of discouragement and things get interesting. Does the unemployment rate as measured by job seeker influence it? If so, it becomes self-referential in that the rate of unemployment becomes a function of itself. Self-referential variables can become unstable. They can just exaggerate their own cycles. Now consider what it measures. Are you discouraged today? Does it measure something other than consumer confidence? Who wouldn’t work if the prefect job were offered? Most retirees, kids, home makers, etc. would enter the labor force if offered a job doing nothing and getting well paid for it.

People who are employed part time but would like to work full time are included. I’ve always wondered about people working full time but who would like to work part time. Job sharing is a recent phenomenon. Including part time workers raises a question about what is being measured. The Hedged Economist worked part time throughout college and grad school. If offered a full time job at post grad rates, would I have taken the job? If so, where would that put me? I wasn’t unemployed; I was a student. I had a job and thus was employed (part time).

My suggestion is ignore the unemployment rate and focus on the change in employment if you want to measure how an economy is doing. Notice the term was employment; not jobs. It is the failure to realize that employment and jobs aren't synonymous that is the Achilles heal of this recovery.

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