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Involuntary unemployment in the USA

Involuntary

Donald Trump is right and wrong about unemployment. He’s right that 20% unemployment is a f*cking shame and calls for action. A fact not acknowledged by (neoclassical) economists, who for Europe calculate ‘equilibrium’ unemployment (NAIRU, see this post by Lars Syll) in countries like Spain to be higher than 20%.These official (!) estimates are beyond ridiculous! Small wonder that people flock to politicians like Trump.

Trump  is however wrong to state that USA unemployment is 20%. Unemployment in many European countries was or is about as high as that – or even higher. But Bill McBride is right when he, on his Calculated Risk blog, takes Trump to task about these 20% for the USA and carefully explains that even ‘broad unemployment’ in the USA is far below 20%, at the moment. We have to respect, like McBride does, the economic statisticians and their results. But we do not have to respect economists who tend to define unemployment away, see also here, which of course plays into the hands of politicians like Trump. Which leads to the question: do economists have an alternative for the rigged concept of NAIRU and the neoclassical tendency to define unemployment away. Yes, we have: the concept of ‘involuntary unemployment’, which we can estimate, using modern data on labor flows, by estimating the amount of people unemployed in one quarter and still unemployed in the next. In the graph above, I do this for the USA. The data indicate that involuntary unemployment in the USA (not the same thing as potential labor available, read Mc Bride!) declined significantly in the USA and, though still high and even slightly rising, is way lower than it was some years ago. Even then, Trump is, to me, more right than the neoclassical economists. Unbelievable. But true.

  1. Susan Feiner
    June 1, 2016 at 7:43 pm

    Now look what they are up to:

    On Monday, May 30, 2016, Real-World Economics Review Blog wrote:

    > merijnknibbe posted: ” Donald Trump is right and wrong about unemployment. > He’s right that 20% unemployment is a f*cking shame and calls for action. A > fact not acknowledged by (neoclassical) economists, who for Europe > calculate ‘equilibrium’ unemployment (NAIRU, see this post” >

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