Unemployment, Underemployment, and Justifiable Collective Hysteria

Mass hysteria – a sociopsychological phenomenon where a common belief or anxiety manifests itself among a group of people.  Has our current fixation on monthly unemployment numbers during this financial crisis come to exemplify mass hysteria? 

Whether you deem the current dearth of consumer confidence a baseless media-driven collective anxiety or not, one thing is certain: Americans are losing their jobs.  The unemployment rate has risen from a reading of 4.9 percent in January to October’s 6.5 percent. But what does this all mean?

From a historical perspective, the last time unemployment reached this level was March of 1994; a banner year – not quite.  But the rapid rise in the unemployment rate only tells part of the story.  In the shadowy nether regions of assessing a more realistic view of the labor market exist terms such as “discouraged workers” and “marginally attached workers”, as well as the underemployed.

If these other labels for workforce participants (or non-participants) are all taken into consideration, the total unemployment rate hit 11.8 percent in the month of October.  And this isn’t fringe economy crazy-talk: the Department of Labor releases that figure in the footnoted bowels of its monthly unemployment report.

The last time the so-called alternative measure of unemployment was this high was January 1994, as the economy exited the recession of the early 90’s and before the tech-boom that lifted us out of that morose situation a few years later.  Undoubtedly for the time being, unemployment will be the single largest factor influencing consumer sentiment as well as recovery performance on debts owed. 

With news that 516,000 Americans filed for initial jobless benefits just last week – a 25 year high – the final leg of 2008 appears it will be a difficult one.  Just how long we’ll being holding our breath for improvements remains uncertain. The accounts receivable management industry will certainly be waiting for improvements in the unemployment rate; that economic measure has proven to be the most important indicator of collection performance over the years.