How high could the unemployment rate rise?

[DrToast]

As many of you have read, even though the economy is adding jobs at a healthy rate, there's still a chance the unemployment rate will rise as people return to the job market.

I crunched some numbers to get an estimate of how high it could rise. There are many factors involved, including how fast people return to the labor force and whether or some return at all.

However, if we look at the size of the labor for at the beginning of the recession, it's 153,869,000. Now add 125,000 per month for the 24 months since the recession began to account for normal expansion of the labor force and you've got a labor force of 156,869,000. Consider this what the labor force should be if people didn't drop out for being discouraged.

If all of those people returned next month, the unemployment rate would be 11%. So that's sort of our cap on the unemployment rate. HOWEVER, not all of them will return all at once. They'll trickle back in over the next 1-2 years or so.

The reason the unemployment rate shot up this month was because a staggering 805,000 new people entered the labor force in April.

In the two months before that, in March it was 398,000 and 342,000 in February. If the next year looks more like those two months instead of April, the unemployment rate might not increase at all and will likely fall.

I suspect the unemployment rate won't increase much more. Unless the next few months look like April and everyone rushes in all at once, I don't see it going higher than 10.1%.

And there's a good chance it resumes falling in the next few months.

[AnneD]

1. Do you REALLY want to know.....

or be around.

[NoNothing]

2. Something doesn't add up though

There are two measurements of unemployment, the commonly reported U-3, which does not include discouraged workers, and the U-6, which does.

Therefore, if it's true, as you say, that "the reason the unemployment rate shot up this month was because a staggering 805,000 new people entered the labor force in April," then what you are basically saying is that a bunch of people in the U-6 category moved from U-6 to U-3.

However, the U-6 *also* went up.

[DrToast]

3. Discouraged worker is a very specific type of person outside of the labor force

You can have left the workforce, but not be considered a discouraged worker. I wasn't very clear on that point.

A discouraged worker refers to a very specific type of person who would rather be working right now, but they gave up on finding something.

However, some people just drop out of the labor force and they DON'T want a job right now. Some people go back to school, some people may retire early, some might say "the hell with working, I'm just going to stay home with the kids for now", etc.

So, not all of those who have left the workforce are considered discouraged.

[tritsofme]

4. Many of these people were likely not included in U6 either

as they had completely left the labor force. I haven't jumped in the numbers, but this would seem likely.

There are actually six measures of labor underutilization, as they call it, ranging U1-U6 with U3 being the official rate. It follows that individuals could shift from U3 to U6, while simultaneously individuals not counted by any measure (including U6) rejoin the labor force to be counted as unemployed under U3.

[newscott]

5. If it weren't for all the road projects going on right now

I bet it would be well over 20%.

[phleshdef]

8. Thats like saying "if there weren't any jobs at all", it would be 100%.

[newscott]

10. I think 100% is higher than 25%

[phleshdef]

12. If no no highway jobs, unemployment is 20% = if no anykind of jobs, unemployment 100%

[Name removed]

6. Deleted message

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[quiller4]

7. If you add normal entries into the market, you also need to subtract

normal retirements. Because baby boomer are reaching retirement age, retirees will exceed job entrants for the next 5-10 years according to most demographic studies.

Expect another 2 months of increased entrants into job market and then a return to declines in size of labor force. If that holds true, we'll see a possible 2 more months of unemployment increases even as the number of jobs added each month grows substantially.

[DrToast]

11. 125,000 is the net number

It's estimated that 125,000 new total people join the labor force each month. That takes into account those leaving, too.

Our population is growing, so the net number is positive.

[Prism]

9. I'd not be surprised to see it tick over 10% again

It's unfortunate, because that "official" number is so massaged for various purposes. I always read the underemployment number to get a grasp on what's really happening with American workers.

At the moment, it's oddly unstable. It peaked at 17.5% in October, came down a bit, flat-lined during the beginning of the year, but now is inching up again. At least, in the official numbers. Gallup does some polls on the numbers, and they're far scarier, with the March underemployment number being at a whopping 20.3% according to their poll of 20,000 adults.

I'm still not sure of the cause as put out by today's reports. College students beginning to seek post-graduate work in anticipation of the end of the school year?

[old mark]

13. In Northern California in 1975, it was around 24%. nt

[ipaint]

14. It doesn't matter. Haven't you heard a rise in unemployment is now a positive sign.

The higher the better. :crazy:

[depakid]

15. Hard to say, factoring in the Gulf and the turmoil going on in Europe

The events of the past two weeks could make it a whole new ballgame.

[Zynx]

16. We've already seen the high. It will start falling ever so slowly.