Unemployment - What does it mean?

Picture this:

On Monday, the unemployment rate is X. On Tuesday, every stay-at-home parent in America decides to "get a job", by swapping children with a stay-at-home parent nearby (maybe they even get paid for their efforts, if you like). They're now all magically "employed". Unemployment figures should now drop (because they're all honest enough to report their newly-found income).

Let's forget that they have to pay taxes on their income - the remainder of which will be used to HELP pay for their newly-found nannies.

Let's forget that every stay-at-home parent doesn't know the first thing about their new charge(s).

If the unemployment rate has dropped, shouldn't it be a "better" economy? Shouldn't we be able to point to Tuesday's employment figures, and say that it's an improvement over Monday's?

And yet, I think Tuesday is NOT an improvement over Monday. In fact, I think the unemployment figures never really changed. On Monday, every stay-at-home parent was actually employed - whether the government acknowledged this or not. On Tuesday, every stay-at-home parent was still employed - and maybe even in a job they'd consider worse than Monday's.

So what? Maybe I'm splitting hairs, and this scenario doesn't really enlighten us. Maybe it points out that we should take government statistics with a healthy dose of scepticism. A "fully-employed" war-time economy, for example, might not be preferred to a peace-time economy where X percent of the labor force is "unemployed" and looking for a paying job.

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Stay at home parents aren't

Stay at home parents aren't currently considered unemployed, since they're not actually looking for work. Same as retirees, children, full time students, disabled people, etc. are also not counted as unemployed.

Bill, I'm afraid Stormy is

Bill, I'm afraid Stormy is right. The unemployment percentage would not change on Tuesday, because those stay-at-home parents are not counted in it.

Nolan, these aren't really just the statistics reported by the government, they're the ones economists tend to use. What use is it to count people as "unemployed" if they're not looking for work?

Stormy, thanks for telling

Stormy, thanks for telling us that any statistics from the government are unreliable. In this case they redefine the word "unemployed" to most likely mean those people getting unemployment benefits.

In the ideal world of the far right, unemployment would most likely be around 50% but reported as zero.

Actually, while the official

Actually, while the official number of unemployed would remain constant, the unemployment rate would drop slightly: the number employed (and thus the labor force) has increased, while the number of official unemployed remains constant. Since the numerator (unemployed) remains constant and denominator (total number of employed plus official unemployed) increases, the rate drops; however as long as there are not an infinite number of stay-at-homes who enter then nanny-force, the rate will never converge to zero.

Unemployment is the wrong way to look at this problem. A better way would be to look at the increase in GDP: what had been part of the hidden economy (unpaid household labor) is now measured in the service sector. So though there is no increase in actual labor or wellbeing, GDP will nonetheless increase, showing a seeming increase in the size and strength of the economy.

BEA is looking into measuring the value of the of unpaid household labor, so that such a dichotomy would not exist. There are of course measurement errors that go along with this, but overall, the unemployment and GDP stats approximate reality fairly well already.

No, they are now "magically"

No, they are now "magically" employed because by swapping kids and getting paid / paying for this, they are now nannies or whatever.

Thats' the point of the post.

In economics jargon, full

In economics jargon, full employment means N(AI)RU. It depends on the rate at which people quit their jobs and the rate at which they find new ones. A regular NAIRU is about 6-7% for most developed countries, I think.

The US is said to be at NAIRU right now. So it's full employment but without a war... oh... nevermind.

The statistic method and rules of unemployment measurement are rather serious and more than adequate, for my taste at least.