A Closer Look at the Unemployment Rate

by Joe Stampone on February 16, 2010

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How many times have you heard people talk about the importance of fundamentals to the real estate recovery. In particular, drugs without prescription unemployment rates.  However, few people dig into and analyze the details of the unemployment numbers. I’ve seen this discussed on a few sites, but I wanted to pass along this generic diflucan style=”color: #0000ff;”>fascinating report conducted by the Center for Labor Market Studies at Northeastern University.

The WSJ sums up the findings:

Unemployment for those in the top income decile–individuals earning more than $150,000 a year–was 3% in the fourth quarter of 2009. That compares with unemployment of 31% for the bottom 10% of income, and unemployment of 9% for the middle decile.

The differing rates of underemployment–including those working part-time for economic reasons–are also notable. Underemployment for the top 10% was 1.6%, while the bottom was 21%.

Basically, the affluent are recovering while the rest of the economy isn’t. This questions the theory of trickle down economics.

What kind of impact do you think this phenomenon has on the CRE industry?

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  • Scott

    I disagree. I don't think this questions trickle down economics. .It is hardly surprising that lower skilled workers are affected severely in recessions. This is a reason given to people for getting more degrees. Second, the data doesn't take under consideration the large number of higher income workers who have decided to exit the labor force during the recession and either retire, go back to school, or stay at home with their kids.

    It is important to note that while it appears at first glance that the lower two deciles have been hardest hit, I believe this merits further analysis. If you look at the percent increase in unemployment rates you can see a much more accurate picture of who has been impacted and at what levels. See my analysis:

    $12,160 or less: +67%
    $12,160 – $20,725: +78%
    $20,725 – $29,680: +104%
    $29,680 – $39,000: +117%
    $39,000 – $50,000: +125%
    $50,000 – $63,000: +110%
    $63,000 – $79,000: +94%
    $79,000 – $100,500: +108%
    $105,000 – $138,700: +100%
    $138,700 or more: +100%

    From this perspective you can see that not only were the hardest hit deciles between $29,680 and $50,000, but the lowest two deciles had the smallest increase in unemployment rates.

    Also consider that many high income earners don't qualify for unemployment, consultants for one. So they are not represented in the fugures.

  • http://www.astudentoftherealestategame.com/ Joe Stampone

    Thanks for your comment Scott. You make some very good points and I agree with a lot of what you said, the report is certainly incomplete. The question the report begs is, what does the unemployment distribution look like during non-recessionary times?

    What data did you use to come up with those numbers? I'd be interested in delving a bit further into these numbers.

  • Scott

    Yeah, this is problem with some numbers: You can make them display the information you want.

    Those numbers came from Veronique De Gugy, Senior Research Fellow of the Mercatus Center at George Mason University. It's from a column she wrote on the The Heritage Foundation's website. I just forgot to quote her in the comment.