Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Unemployment and the Great Depression analog

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Let us start this discussion with the admonition that you, dear Citizen, will be continuously lied to by your government.  I know those are harsh words, and perhaps a bit unexpected from an investment blog.  There are times to be delicate with the truth, and there are times to deliver it with a 2×4. 

The Department of Labor goes to great efforts to compile the statistics of employment and unemployment.  As you can imagine, it’s understood by everyone that there’s a quite a bit of guess work involved.   As long as the guess work and assumptions are documented, the users of that data can develop workarounds with those guesses and weight them accordingly. 

The “official total unemployed” figure the media reports is one for six numbers that is released to the public.  For whatever reason the media and government like to fixate on the U-3 figure. Here’s a chart showing all six “U-” figures.    

The most valid figures of unemployment, in my opinion, are the U-6 category, since it is the most inclusive at showing those that are willing to work, but can’t find that work.  This comprehensive figure shows 12.2% of Americans looking for work, a little less than double the unemployment rate the government touts. 

For perspective, in 1930,  the unemployment rate with a similar methodology with the U-6, was 8%.  If the Great Depression is an analog, and we’re now one year off the stock market highs, (1929 and 2007 were the stock peaks), we’re already well ahead of the joblessness rate of the Great Depression.

EDIT: 

Excellent videos such as this make me very reluctant to make analogies to the Great Depression, as they are such poignant reminders that modern society is so ill-equipped spiritually, mentally, and physically to make it through such a time again.

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Written by heyercapital

December 5, 2008 at 11:37 am

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