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Unemployment and the Manchester Index

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I know that the recession isn't over. I know it because the unemployment rate is still too high (9.7% in August, according the Bureau of Labor Statistics, over 16% if you count all of the folks who are really looking for full time work) and because there are millions of workers still looking for jobs. To paraphrase Yogi Berra, the fat lady has not begun to sing. She isn't even warming up.

Then I think of the Manchester Index. I didn't create the Manchester Index, but in researching unemployment, we at ADA unearthed a 1983 article from the National Journal. It explained a statistic which highlighted the lengthening duration of unemployment. Proposed by Paul B. Manchester, a staff economist at the Joint Economic Committee at the time, the index, also known as Total Weeks of Unemployment, is the product of the number of jobless workers by the average duration of their unemployment. In essence, the Manchester Index provides a more two dimensional look at the unemployment rate.

For example, the level of unemployment has historically been reported as the number of people looking for work but unable to find work. For example, the numbers (in millions) in selected years:

1975 - 7.93
1982 - 10.68
1983 - 10.72
1992 - 9.61
2002 - 8.38
2008 - 8.92
2009* - 13.7

*Average, January through August 2009

The Department of Labor also tracks the average number of weeks individuals are unemployed, as demonstrated here:

1975 - 14.2
1982 - 15.6
1983 - 20.0
1992 - 17.7
2002 - 16.6
2008 - 17.9
2009 - 22.3

When those figures are combined you get the Manchester Index:

1975 - 112.6
1982 - 166.6
1983 - 214.3
1992 - 170.2
2002 - 139.1
2008 - 159.7
2009 - 307.1


What does the Manchester Index tell us about unemployment? It tells us that the loss to the nation can't be measured simply by counting the number of unemployed people. From a policymaker's perspective, we have to deal with the increasing length of unemployment and how it is addressed. Job training programs, industrial policy, unemployment compensation and health care reform are all part of the solution, but unless we are attempting to address the issue of the long term unemployed (who are losing homes, health care, and retirement security) we could be addressing the wrong problem.

The additional information found in the Manchester Index reinforces Americans for Democratic Action's calls for extending unemployment benefits for unemployed workers and health care reform as a way to undergird our economy and provide security for workers - both the insured and the uninsured. It also points to the need for the government to offer a comprehensive job programs as well as job training.

Even as we acknowledge the success of the initial stimulus program in averting a worse crisis, many dangers remain. The nation could experience a double-dip recession, when those out of work exhaust their savings and unemployment benefits, can no longer make their mortgage payments. Foreclosures on standard 30 year mortgages are already outpacing the sub-prime mortgages that contributed to the economic collapse last year. Make no mistake, we know how to recognize when the recession is over; it'll be when we have a full employment economy. And for that, the fat lady hasn't even changed into her costume.