Federal Reserve policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours.
As a result, the “significant underutilization of labor resources” that Fed officials highlighted last month as they renewed a pledge to keep interest rates low for a “considerable period” is probably even more severe than currently estimated. And the information gap means policy makers may have more difficulty gauging the right moment to raise rates off zero.
The Fed is flying blind because they are relying on the mathematical models of PhD economists. Those models have no connection to reality.
The Labor Department can put its finger on how many people are working part-time because full-time jobs aren’t available, or how many are so discouraged that they’re not even looking for employment. Other forms of underemployment — for example the graduate with an English degree who’s working as a barista –are harder to pinpoint though just as important in trying to measure whether the labor market has improved.
The Census Bureau, which surveys households to get the information needed for the Labor Department to crunch the monthly jobs data, doesn’t ask full-timers whether they’d prefer a different job or additional hours. As far as anyone knows, those workers are fully employed and content.
“If you’re a college graduate working at Starbucks and you work 32 hours, we know you’re in the wrong job,” Stevenson said at the conference. “If you work 35 hours, we don’t know.”
In other words, the government is assuming that everyone who is working 35 hours per week is happy. Apparently, their mothers never told them what happens when you ass-u-me something.
Oh well, at least the college graduates are all happy…waitaminute:
Meanwhile, a report earlier this year from the Federal Reserve Bank of New York found that 44 percent of working recent grads were underemployed in 2012, defined as holding a job that doesn’t usually require a bachelor’s degree at all. That was up from 34 percent in 2001 and approaching levels last seen during the 1990-91 recession, when concern about underemployment heightened, the central bank said.
Mario Mendoza said he works as many as 70 hours a week driving a taxicab in Miami. The 34-year-old has a bachelor’s degree in sociology and anthropology and a master’s in global sociocultural studies from Florida International University. He said finding an entry-level job where he could do social or market research would put his driving days behind him.
“I’ve applied for many of those jobs, I just haven’t been called up for the position,” Mendoza said. “If you spend so many years in school preparing yourself and studying, you want to use those skills to work, not to do something like be a waiter or drive a cab or work at Starbucks.”
Sorry, Mario, but all those people who told you that a college degree was the way to prosperity lied to you. (What the hell is “global sociocultural studies” anyway?) You should never listen to people who have PhD…in anything.