The unemployment rate: It’s not 1983

First this disclaimer: The economy is bad. Really bad. And a lot of people are unemployed, according to the Department of Employment and Economic Development, which today released statistics showing the unemployment rate jumping a half-percentage point — to 5.8%. On a seasonally-adjusted basis, that means 171,478 people are out of work, and there’s no way to put lipstick on that pig.

It’s the most people unemployed in Minnesota since June 1983, when 174,067 were unemployed.

But here’s the thing: It’s not 1983 out there. The total number of unemployed then was a far greater number of the labor market than it is today. There are about 800,000 more people in the labor force today than in 1983, when the unemployment rate (seasonally adjusted) was 8 percent.

749,581 more people are working today than were working in Minnesota in 1983.

Per capita income in Minnesota at last check — 2007 — was $41,034. In 1983 it was $12,698. Taking inflation into account, that would be $28,043.20 in 2008.

That’s what the numbers say. But what do you say? If you’re old enough to remember 1983, how different is your economic situation now than then?

  • When I was 9, 1982, my mother was out of work for 9 months. In 1984 my father was out of work for 6 months. Also in 1984 grandfather was out of work and 2 of my uncles lost jobs that year. But 1983 was ok.

    Today I know of no one without a job (or the past 2 years).

  • deminn

    Why do you ignore the cost of live isn’t in 1983 dollars, health care of 200%, education up 100%, Gas and other fuels up who knows how much. The pain index looks more significant in reality than you seem to want to let on with this piece.

  • Bob Collins

    Well, sure, deminn, lots of things are more expensive. But could you provide the pain index so we can look at it.

    You mention gasoline prices as being higher. According to the DOE, gasoline cost $1.43 (which seems high to me, but I’ll go with it for sake of argument) in 1983. In 2008 dollars, that’s $3.27, not significantly lower than the $3.60 it is today.

    Other products actually DO cost more. Milk was $1.15 then. It’s $2.54 in today’s dollars. That is, of course, much lower than the $4 it is now.

    On the other hand, the cost of clothing — assuming you’re not buying high-end — is lower now than then and the reason, of course, is the manufacturing was shipped offshore.

    There’s no question we can find areas where things seem appreciably worse, but we can’t ignore those that are better in the process. The question is what is the overall effect compared to 1983 and that’s why I asked the question in the last paragraph.

    From what I can see, I’m saying it’s not 1983. If you have data that says it is, I’m all for acknowledging it.

    News Cut is a discussion, not a lecture.

  • bsimon

    One thing thats bizarre about 2008 vs 1983 is that so many people are losing their homes in 2008, without having lost their jobs. As Bob notes, job losses have been bad – relative to recent years – but not bad relative to other economic slowdowns.

    It kindof makes me wonder whether the unemployment figure is useful as a standalone economic indicator.

  • Mark Gisleson

    In 1983 most people out of work were talking about the Reagan Recession. They were disproportionately blue collar. I remember it well because I had been laid off from my factory job in early 1982. Layoffs in Iowa got so bad the state lost a significant percentage of their workforce who were forced to emmigrate to other states to get jobs.

    1983 was also the end of the post-WWII era where you could be blue collar AND middle class. That’s no longer true and Reagan breaking up the unions had a lot to do with that unfortunate trend.

    But more important, you’re forgetting that even the unemployed had health insurance in 1983 (very few employers cut off benefits to laid off workers — at the very least they would offer them the option of paying their own premiums).

    Clothes may have been more expensive, but we weren’t into being branded then, and few job interviews required expensive suits, just “a” suit.

    The unemployed were also much more likely to collect unemployment benefits. A recent study found that only about one-third of American workers who are laid off or fired are eligible for unemployment benefits today. And, as a former career development professional, I know that for at least the last ten years the state of Minnesota has routinely rejected unemployment claims whenever feasible, forcing laid off workers to appeal before they can collect benefits.

    1983 was brutal, but there was still a safety net. In 2008 when you lose your job, there’s a much better chance you’ll lose your home, your credit rating, your health insurance, etc.

  • Paul

    Bob Collins,

    Isn’t this the guy who told us things are better than they seem because unemployment was down slightly two months in a row? (Fun With Numbers, July 17) Oops. Now we’re told you can’t but lipstick on this pig… but here we go anyways… it’s not 1983. Well, it’s not 1972 or 1731 for that matter either.

    Using the per capita income figure is a dicey proposition because it’s an average, and like all averages small numbers of high numbers can raise the average. One or two Carl Polad’s can raise the average if they make enough money, and they’ve been making a lot of money. In order to really figure how good or bad things are today you have to look at distribution. The gap between the super wealthy and everyone else in Minnesota as in the rest of the country has widened considerably. Furthermore, measuring something like inflation’s bite of our 2008 income is difficult because straight up comparisons miss things like housing costs, health care, and energy. We’re being told that our heating bills will go up 30% this winter, that’s not part of the official inflation rate.

    Anyways, the per capita figure is a year old, it may well have dropped this year. The actual unemployment rate is always higher than the official one as well because the official number only counts those collecting unemployment which is only available for a limited amount of time. Then there’s the problem of underemployment which is worse now than it was in 1983.

    This economy could well be or get just as bad or worse than than it was in 1983.

    As for myself, I was working at a record shop attending the U, and the future was so bright I had to wear shades in 1983.

  • The health of the economy as it applies to any given individual is hard to measure. In 1983 I was an enlisted airman in the USAF, a job not known for being highly remunerative. Twenty-five years later, with a career well established and a strong savings account in place, things look just fine to me. Obviously, that doesn’t hold true for everyone; economic pain or gain is a highly localized, personal issue. I’m not convinced it can be measured across a diverse population in any meaningful way.

    Consider this, though: mortgage interest rates in 1983 averaged over 13%. What are they today? Slightly more than 6%? That alone is a huge savings for homeowners that live within their means. I’ll take that over a cheaper gallon of milk any day of the week. If the worst were to happen and I ended up out of work, I could sustain my mortgage payments out of savings for far longer at 6% than I could at 13%.

  • Bob Collins

    Saying things aren’t as bad as they may seem and saying they are good are not the same thing, Paul.

    Similarly, pointing out it’s not 1983, doesn’t mean it’s 1999, either.

    I’ve seen people claim that underemployment is “worse” now than in 1983, but I rarely see specific — as opposed to anecdotal — evidence to support that conclusion. As I said earlier, I’m more than willing to accept the premise, but not merely on faith, especially when per capita income has outpaced inflation since 1983.

    The housing problem can’t be wished away, of course. But even with the high foreclosure rates, the home ownership rate in January 2008 was 67.8 percent. Down from its 2005 high, but it’s not 1983 in that category. It’s 2002. In 1983, the rate was 64.6 percent.

    In 2008, 82.8 percent of households have income equal to or greater than the median income inthe U.S., a numer also comparable to 2002.

    Consumer credit it one area that is significantly different, however. The outstanding credit in 1983 would be $894,062.23, (millions) not quite a third of what it is now. One question is weather that is indicative of a failed economy, or a changing attitude on people’s handling of their own money. Does the ballooning consumer credit situation indicate a need to cover basics through borrowing, or does it indicate a willingness to spend like there’s no tomorrow? If it’s the latter, whose fault is that?

  • Well this has taken on a bit of a bite.

    My 2 cents, and I think Bob did hit it in his last post, almost everyone has a job but they are not keeping a equal (to 1983) amount in their bank accounts. But even though Health Care and Energy have when up greatly the last 10 years, other consumer spending has went up at (IMO) a higher rate.

  • Bob Collins

    Brian: I’m not sure they are or aren’t keeping an equal amount in their bank accounts. For example, retirement saving via pension plans I THINK has increased over ’83. There are more financial instruments now that people treat as savings accounts — houses, of course, comes to mind.

    Part of the difficulty of measuring this is a change in people’s attitudes toward money.

  • Paul

    Dude,

    The “median” is the point at which 50% of a sample fall above and 50% fall below, you can’t have 80% at a median.

    The difference in home ownership between 83 and now is 3.2% as of January this year, over a million homes have foreclosed since then, that gain may well have evaporated by now. At any rate, increases in home ownership aren’t necessarily a good thing if those homes are crushing income with debt.

    The credit problem is a result of stagnate and or/falling bargaining power and wages over the last 20 years. The reason consumer debt has risen so much is because people have been borrowing in order to buy that which they cannot afford. The Fed kept the interest rates low so cheap credit could compensate for stagnate income, and keep consumer spending going. If Americans had had to live off their income alone spending would have slowed like it is now. The housing crises is a perfect example, the increase in ownership doesn’t reflect an increase in income, it was spawned by cheap and way-to-easy credit- chickens that now coming home to roost. The whole world knew that Americans weren’t actually making enough money to keep any expansion going, that’s why they financed our spending with cheap and easy credit. That credit is used up now, and wages for most Americans falling in real terms because even our deflated inflation is increasing. This is one of the reasons this is the spookiest economy since the great depression.

    It’s a simple fact that Americans are saving less. Savings are at their lowest rates in 70 years http://blog.leonardwealthmanagement.com/lwm_blog/2008/02/american-saving.html

    Participation in traditional pension plans is also at 70 year low, and the pension plans are in crises because many large corporations stopped making the contributions back in the 90s when the plans were making money off the various stock market bubbles. The “pension crises” is probably the next big shoe to drop, it will hit fixed income people hard, and it will cost taxpayers trillions of dollars. For instance Northwest Airlines is considering turning it’s pension over to the feds, if they do those pensions will be worth 60 cents on the dollars over night. The 401K and other schemes that were supposed to replace traditional pension plans with market magic are obviously in trouble along with the rest of the stock market. At any rate, pensions and 401Ks are no substitute for savings accounts because you can’t access them anytime you want, at least not without penalty. This is yet another reason why this economy is spooky, and it’s actually worse in all these regards than it was 1983. There is no reserve capacity, there’s nothing to fall back on. Home equity which was sold as “wealth” a few years ago has not become crushing debt for many people.

    Underemployment is a difficult to measure, but you can guess at it by looking a number of different factors. High wage jobs have been replaced by lower waged jobs ( to the extent that they’ve been replaced), the number of part time jobs has continued to increase since the 70s, and the number of hours Americans has increased without corresponding increases in hourly wages. The government doesn’t calculate underemployment but when you look at all these other indicators it clearly points to a workforce that’s working more for less.

  • Mark Gisleson

    Bob, it would be good if you would try to remember that almost all the data you’re pointing to is either released by the government, or based on data released by the government. Unemployment data has been gamed by each administration since Reagan first tampered with the formula. No one outside the government can do anything more than guess at the actual numbers.

    Four consecutive presidents have chosen to undercount unemployment, and for obvious reasons. It is reasonable to question the government’s data since average people live in a world that is nothing like what the official numbers suggest, but it is not reasonable to demand that critics provide their own numbers since we have no access to the actual raw data, and in some cases, the necessary information isn’t even being collected.

    BUT, if you want to take the population of the U.S. (301M) and then subtract the number of Americans 18 or under (72M), subtract the number of Americans on active military duty (1.4M), subtract the official number of employed Americans (154M), and subtract the number of retired Americans (33M), surviving spouses (7M) and those on SS disability (8M), well, then you’d have a more accurate unemployment figure, 25.6M, than the government’s laughable claim of 5.8%, or 8.8 million jobless Americans.

    And no, I don’t stand by those numbers because I had to take them from countless different, conflicting sources. Only the government can determine the true unemployment rate, and they prefer not knowing.

  • Paul

    Oops,

    I meant to say that: Home equity which was sold as “wealth” a few years ago has now (instead of “not”) become crushing debt for many people.

  • bsimon

    Despite the cryptic phrase “even our deflated inflation is increasing,” Paul writes a good post.

    To put it another way, 70% of the US economy is based on consumer spending. For most Americans, wages have been essentially flat for nearly a decade. Economic growth during that time was based primarily on rising debt loads – driven primarily by booming real estate values, but also by generally cheap credit (i.e. auto loans, credit cards, etc).

    So… If wages stay flat & debt is harder to come by, where will growth come from? So far this year, the answer seems to be: increased exports thanks to the weak dollar. The problem is that exports are not going to improve enough to create real growth in the economy. For that, wages will have to grow. Until wages grow, we are faced with stagnation. If prices continue to rise, call it stagflation.

  • Heather

    I’m also curious about the proportion of full-time, living-wage jobs with benefits vs. part-time or “contract” work. It *seems* that many companies are moving toward hiring people to whom they will not have to provide benefits (sick leave, paid vacation, health insurance…) as a way to increase profit — did you see the photos of the Disney hotel worker union folks getting arrested? –and wonder if there is really an increase in that tactic. If so, how do you factor “underemployed” into a conversation about the unemployed?

  • Bob Collins

    On the other hand, Heather, in Minnesota we have MinnesotaCare, which we didn’t have in ’83. The “underemployed” may be reality — it most certainly is a claim — but I’m not seeing the data I requested. Anecdotally, there seem to be a lot of contract employees in certain fields, but in many cases — again entirely anecdotally — it was the avenue some took to be their own boss.

    Part of the problem of comparing this is that it’s impossible to compare. I make more money than I did in ’83 — although at the time $35,000 in New York City seemed like a lot of money — but most people make more money when they get older. They also end up having kids and other obligations.

    They also have greater desires. Our houses are bigger than they were in ’83 because we demand them to be so, which in turn stresses our economic situation. So while the economy is often characterized as something caused by someone else, our own economic situations are also influenced by the lifestyle we choose to fund.

    Cellphones? How many of you are using them? How much are you paying per month? $70. Internet access? How much is taht? Cable TV or Dish? Or are you just watching the 3 major stations we watched in the “old days?”

    In many cases the economy is defined as how it effects the poor and while that’s is certainly an important demographic group, there’s more to the economy than the poor.

    And how we feel about the economy is quite often how we feel we’re able to support the lifestyle to which we’ve become accustomed. Has that lifestyle changed?

    If so, is it that the economy is changing that dramatically on its own? Or is it that the pace of our lifestyle demands haven’t adjusted?

    Again, your personal stories preferred

  • Heather

    I don’t have data, Bob, but I’ll bite on the personal story front. Moved here just over two years ago — husband had job waiting, I did not. I am a college grad, with experience in education and communications — not late-career, but no longer entry level. It took me four months to find a job, which turned out to be my first untenable “bad fit”, and I am now on my second contract job. I like where I am now, and get enough out of the position to stay on purpose (for the time being), BUT — at both places, there is a definite sense of keeping people as “temps” as a way to keep costs down. Very different from the last time I worked as a temp (1995), when the work actually involved short-term assignments. When you’re in a job for a year or more, are you really “temporary”?

  • carter

    Kevin Phillips addresses many of these issues with facts, not anecdotes or personal stories, in a recent article in Harper’s Magazine. Turns out 1983 is a key year in the cooking of the inflation numbers, but Phillips also discusses how unemployment numbers have been cooked. Turns out the anecdotes that many of the above commentors have been providing are fairly factual. Phillips provides the story at this Link.