I recently read news (that was presented in a very grim way) that a city’s unemployment rate rose to 6%.
So this means that out of all the people of working-age in that city, 94% of them were employed right?
Isn’t that a really good scenario? 94% is very close to 100% right?
I’m also surprised by this figure because the way the people are talking about the job market, it sounds like a huge number of people are unemployed and only a lucky few have jobs. Many people have said that about half of new-graduates cannot land their first job.
Am I missing something here?
In: Economics
The actual unemployment rate is not the main problem.
Think about this: If the unemployment rate is 0%, what does that mean? Everyone has a job. More people are making money. The only way to get a new employee is to hire a new graduate or pay more than the competitor. So more people with more money means inflation increases. It also means it is very difficult to start or grow your business, because there is nobody left in the labor market.
The only Dairy Queen near me is closed half the time because they can’t retain workers. This bothers me greatly. If the unemployment rate was higher, I would be able to eat my Blizzards more often.
On the other hand, a high unemployment rate is also bad. The reasons are obvious: More idle and/or homeless people. But additionally, if fewer people are making money then fewer people are spending money, which means the entire economy slows down. There’s more competition for fewer jobs, which means people are willing to work for cheap. If too many people are living in poverty, they can’t buy stuff, which means the stores in that area begin to close, which makes the problem of poverty even worse.
There is no agreement on what constitutes a “good” unemployment rate, but most experts insist it is somewhere in the 3-5% range.
The unemployment rate in the US is current about 4.1%, so not only is 6% above the average, it is almost 1.5x the average, which is rather significant, and translates to a large number of people. Referring to this chart from the Bureau of Labor Statistics [https://www.bls.gov/web/metro/laummtrk.htm](https://www.bls.gov/web/metro/laummtrk.htm), 6% puts a city pretty near the bottom of the barrel in the US. For reference, the US unemployment rate was pushed to about 13% during COVID. Being, now, only a bit less than half the rate during a worldwide catastrophe is better than nothing, but still not good.
6% unemployment is, in the definition I’m familiar with, 6% of the labor force not employed but looking for work. If you have 94 people in a town employed and have a 6% unemployment rate, then 6 people are looking for jobs.
As far as that being “bad”, you need to think outside the rate. If a lot of people are looking for jobs, then employers are probably aware that they can push their staff harder for the same money because they can’t just find another job. The people unemployed are also a weight on the social safety net if it exists, or are struggling to make ends meet if they aren’t living with someone who does have a job.
When I was growing up, 4% unemployment was seen as nearly as good as you could reasonably expect. I don’t think 6% is too bad, but it could be exacerbated by people being more specialized now so jobs are generally harder to come by. 10% is pretty bad, it means you’re probably competing with far too many people to have a good shot at any role without being stupidly overqualified.
6% isn’t bad. But lots of things require context and the composition of the unemployed also matters a lot. At the national level, an unemployment rate of 3.5%-4% is considered full employment (there are always people in transition). Many countries have far higher unemployment rates than 6% for decades and would love to have “only” 6% unemployment.
A certain percent of unemployment is a good thing. There are always going to be workers in transition, leaving one job, looking for another, and a small percent of unemployment demonstrates most people who need jobs have them, but some degree of flexibility remains. Most economists believe that the ideal unemployment rate is somewhere between 3 and 5%. 6% is higher than that, and it’s 50% higher than the national average which is sitting at about 4%. This makes 6% look bad relatively speaking.
Also, because it’s an average of the whole population, it doesn’t impact every demographic equally. So certain groups, like recent college grads, unskilled workers, minorities, etc. might have higher or lower unemployment rates than that.
Another potential factor is that it’s rising. Looking at long term trends is often more informative than a single data point. So if unemployment in your city has been on an upward slope, and is continuing to rise, the trend may be more alarming than the 6% itself.
Final thing to consider is the writer’s potential agendas or biases. Maybe they want to make things sound worse than they are because bad news sells, or it supports a certain political view. I don’t know if this is the case here, but it’s something to consider when evaluating information. News can be spun in so many ways.
The 25 year old living with their parents who has given up on looking for a job doesn’t count as unemployed.
The person with a college degree working 25 hours a week at Walmart just so they can make partial payments on their student loans doesn’t count as unemployed.
The parent who decides to stay at home and be a full time homemaker because they can’t find a job that pays enough to cover child care and commuting expenses doesn’t count as unemployed.
For every 94 people with a job, any job, there are 6 people actively looking for work who can’t find it. Yes, that’s pretty bad. Not Depression level bad, but still bad.
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