US unemployment falls to 3.7 percent – lowest since 1969

US unemployment falls to 3.7 percent – lowest since 1969. By AP.

The U.S. unemployment rate fell in September to 3.7 percent, the lowest since 1969, when young men were being drafted to fight in Vietnam and the American auto industry and the space program were going full blast.

The Labor Department reported Friday that the rate edged down from 3.9 percent the month before as employers added 134,000 jobs — a figure that was probably depressed by the effects of Hurricane Florence in the South. Still, it extended an extraordinary 8½-year streak of monthly job growth, the longest on record.

The ultra-low jobless rate — the best in nearly 49 years — reflects a healthy economy driven by strong consumer and business spending. In fact, hiring is so strong that employers are having trouble filling openings and some are being forced to offer higher pay.

Despite the similar unemployment rates, today’s economy is vastly different from that of 1969. Back then, one-third of Americans worked in manufacturing; now it is barely 9 percent. Strong economic growth back then was propelled by huge government spending on the Vietnam War and newly created Great Society social programs. And women were much less likely to work.

Unfortunately the comparison with 1969 is not quite so rosy, because the definition of “unemployed” has changed many times since then. Each change has made the headline unemployment rate a little lower — one “solution” to the unemployment and inflation problems of the 1970s was to change how to measure them, so they didn’t seem so bad. There is also a complicated interaction with the much-larger welfare state that exists now.

In the US, there are six unemployment measures, called U1 through U6. The headline unemployment is U3. But what people tend to think of as “unemployment” is probably U6.

The difference between U3 and U6:

The U6 unemployment rate counts not only people without work seeking full-time employment (the more familiar U-3 rate), but also counts “marginally attached workers and those working part-time for economic reasons.” Note that some of these part-time workers counted as employed by U-3 could be working as little as an hour a week. And the “marginally attached workers” include those who have gotten discouraged and stopped looking, but still want to work. The age considered for this calculation is 16 years and over

Graphs of U3 versus U6 before 1994 are suspiciously rare on the Internet (perhaps because they are so politically charged) but I found this:

Squinting carefully, you can see that the U3 and U6 gradually diverged after WWII with most of the divergence between 1970 and 1985.

Currently the U6 rate is 7.5%, and the U3 is 3.7%:

The difference between the U3 (official) and U6 rates from 1994 is that the U6 is almost double the U3.

To get back to today’s news: the proper comparison of true unemployment between now and 1969 is probably of the U6 rate, which was 7% in 1969 and 7.5% now. US unemployment truly is back to around the levels of the late 1960s!

Trump can take credit for some of this. While the trend to lower unemployment started at the end of the last recession around 2010, Trump’s roll back of superfluous regulations and impediments to business appears to have fired up the US economy to higher growth rates than seen for more than a decade.