The unemployment rate is soaring—the official February rate hit 8.1 percent. That is the highest level in 25 years. We have lost more than 4.4 million jobs since the recession started in December 2007.
Even this high rate understates the degree of unemployment. When the media cites the unemployment rate they typically use what the Bureau of Labor Statistics calls U-3. This measures counts people involuntarily working part time as fully employed and does not count people that want to work but have given up looking for work. The Bureau does have an alternative measure of unemployment that corrects for these shortcomings; it is called U-6. The official U-6 unemployment rate was a much higher 14.8 percent.
As Dean Baker reports in his useful March 6, 2009 Jobs Byte: “The economy is in a free fall with no obvious brakes in place. The recent forecasts, used in analyzing the stimulus and the budget, which projected 8.5 percent unemployment for the 4th quarter, now look impossibly optimistic. The unemployment rate is likely to hit 8.5 percent by March and will almost certainly cross 9.0 percent by the early summer. Without substantial additional stimulus, it could cross 10.0 percent by year-end.”
As I noted in a previous post, the predicted unemployment rates in the baseline scenario that the Treasury plans to use in its upcoming “stress test” of the banks are 8.4% in 2009 and 8.8% in 2010. Clearly this is not enough stress!
This situation also points out the need to fix our broken unemployment system. The New York Times recently highlighted a report by the Center for American Progress and the National Employment Law Project which found that “tighter rules mean that just 37 percent of unemployed Americans are receiving jobless benefits today, down from 42 percent during the 1981-82 recession and 50 percent during the 1974-75 downturn. Americans today receive a maximum of 39 weeks of unemployment benefits, down from 65 weeks in the 1970s. The average weekly benefit is $293.”