Underemployment versus Unemployment

The chart above is in an article in today's San Francisco Chronicle (click here).

The article talks about the rise in the "underemployment rate." This measurement reflects the fact that the unemployment rate doesn't take into account the many workers whose hours and benefits are reduced during a recession. It gives all of us a better picture of how severe the current recession has become. This staggering number demonstrates the huge percentage of our population suffering right now. It also explains why retail sales have dropped so sharply, as underemployed workers are less likely to spend.

On the other hand, this data also can come in handy in the future at refuting the concerns that we may end up having a jobless recovery. As the economy recovers, the underemployment often drops far more quickly than the unemployment. This is due to the fact that employers often increase hours and benefits for their underemployed workers before they add positions. Thus, while it may seem like no jobs are being created, in fact, millions of underemployed workers are going back to full time status.

Let's hope that the underemployment number has peaked!