Thursday, January 31, 2008

8% Jobless Rate Good? In Germany It's 15-Yr. Low

Jan. 31 (Bloomberg) -- Germany's unemployment rate fell to the lowest level in 15 years in January. The jobless rate, adjusted for seasonal swings, dropped to 8.1%, the Federal Labor Agency in Nuremberg said today.

Comment: We haven't had an unemployment rate in the U.S. above 8% in almost a quarter century, since December of 1983 (see chart above, click to enlarge), following the longest post-WWII recession in U.S. history (16 months).

17 Comments:

At 1/31/2008 3:15 PM, Anonymous Machiavelli999 said...

But...but...mark, the euro is so strong and the dollar is so weak...

I don't understand. Are you telling me that economic performance does not just come down to who has the stronger currency??

[sarcasm off]

 
At 1/31/2008 3:22 PM, Anonymous Anonymous said...

Machiavelli999:

You silly person.

Don't you know the unemployment numbers are all bogus.

 
At 1/31/2008 3:47 PM, Anonymous Anonymous said...

German labor force participation is 71.5%

U.S. labor force participation is 66.0%

If the U.S. had the same labor force participation rate as Germany the U.S. would have an unemployment rate of 10.5%.

Even with an 8.1% unemployment rate, Germany still has a greater percentage of it's population employed than the U.S. does.

 
At 1/31/2008 4:09 PM, Anonymous Machiavelli999 said...

I call bull on your information.

I agree that the latest labor report does confirm that the US labor force participation rate is 66% as you cite and I will trust your data on the German labor force participation rate. However, that does not imply anything!

The lower labor force participation rate is almost certinaly due to the fact that more women are stay at home moms in US than in Germany.

The point is an unemployed worker is defined as one who has actually looked for a job in the last 4 weeks. I am sure it is a similar definition in Germany.

I congratulate Germany on getting more women into the work force, but that is more of a social criticism of the US than anything else.

 
At 1/31/2008 5:00 PM, Blogger spencer said...

I assume this data is for the combined East & West Germany.

Right?

 
At 1/31/2008 5:36 PM, Anonymous marmico said...

Right. The OECD harmonized unemployment rate for Germany is about 6.3%. Dean Baker visited Megan McArdle last September.

 
At 1/31/2008 6:57 PM, Blogger Rick Ballard said...

"I call bull on your information."

As well you might, machiavelli999. If one applies the BLS definition of "the civilian
noninstitutional population 16 years of age and over" as the "workforce" to the German Federal Employment Office's numbers, the comparable German rate is 62%. Oddly enough, that German Federal Employment Office seems to feel that the unemployment rate was 10.8% in '06.

Interesting gymnastic exhibitions here. I give this one a 3.6 with no style points.

The rebuttal will be that the German apple must be evaluated under different rules than the American apple because.... well, because the phony story won't hold up unless you do.

 
At 1/31/2008 7:01 PM, Anonymous Anonymous said...

Machiavelli,

Incentives matter. Germany has higher income tax rates and a higher cost of living than the U.S.

I read several months ago in the WSJ that a woman's salary is taxed at her husband's marginal tax rate in the U.S. This would be a powerful disincentive for female participation in the workforce. I am a Canadian and would appreciate if you could confirm this for me.

Canada also has higher female participation in the workforce than the U.S. as well as higher personal income tax rates. Tax free day was in July at one point under PM Martin and is now back in June.

Thx :)

 
At 2/01/2008 9:56 AM, Anonymous bob wright said...

Anonymous 7:01 pm:

A husband and wife who file a joint tax return in the U.S. have their wages combined and treated as one income.

From this perspective, you can't really say one person's income is taxed at the other's marginal rate.

The only way you could say this was if the man was working before the woman, then the woman's income is added to that of the man and therefore the woman's income is taxed at the highest marginal rate of the combined income.

2008 Married, Filing Jointly Tax Rates:

Note the following income ranges are Taxable Income, not AGI

T.I. = AGI - Exemptions - Deductions

$0-$16,050 10%
$16,050-$65,100 15%
$65,100-$131,450 25%
$131,450-200,300 28%
200,300-$357,700 33%
$357,700+ 35%

Note that the higher brackets are actually greater than those shown because deductions and exemptions are phased out in higher income brackets.

So if a couple has T.I. of $70,000 with just the man working and the wife gets a job making $30,000, her entire income would be taxed at the 25% rate.


Phase Out for Married, Filing Joint:

Itemized Deductions: $159,950
Personal Exemption: $239,950-$362,450


Most people don't realize that the U.S. Congress penalizes successful people by taking away their exemptions and deductions.

 
At 2/01/2008 2:53 PM, Blogger Walt G. said...

"So if a couple has T.I. of $70,000 with just the man working and the wife gets a job making $30,000, her entire income would be taxed at the 25% rate."

In that case, when you add in 7.6% Social Security, and 4% state and local income taxes that amounts to 36.6% in income taxes. Add in the cost of commuting, parking, and other work-related expenses and the incentive to work quickly disappears. That’s one of the reasons so many people work “under the table.”

 
At 2/01/2008 3:07 PM, Anonymous bob wright said...

walt g:

If the woman is self employed, as I am, then the FICA/FUTA is 15.3%, not the 7.6% that W2 employees pay.

Of course, the W2 employee is really paying the entire 15.3% through lost pay raises.

When my company looks to hire an employee, we figure the total cost to employ that person [wage + FICA/FUTA + workman's comp + health care + unemployment insurance...], not just the hourly wage.

Anyone who believes companies do otherwise is deluding themselves.

I know there is a large underground [cash only] economy - particularly in restaurants and the trades - construction, auto repair, etc. No idea how large it actually is.

 
At 2/01/2008 8:11 PM, Anonymous Anonymous said...

So if a couple has T.I. of $70,000 with just the man working and the wife gets a job making $30,000, her entire income would be taxed at the 25% rate.

That would be true...if the couple received their entire paycheck in one lump sum at the beginning of the year. Otherwise, bi-weekly, weekly, or monthly paychecks smooothe some of that inequity in marginal rates.

skh.pcola

 
At 2/01/2008 9:16 PM, Anonymous Anonymous said...

Mark,

I like your blog, but I think it's important for you to explain to readers that under former President Bill Clinton's watch, the methodology for calculating the unemployment rate changed drastically.

First, Clinton changed the sample universe, lowering significantly the number of folks living in cities included in the sample. Doing so under-reported unemployment by minorities in the inner-cities, thus lowering the unemployment rate. In short, Clinton lowered the numerator of the unemployment rate by changing the way the numerator is calculated.

Another change made under Clinton's watch was to eliminate the pool of 'discouraged workers' from the total pool of 'employable people.' The effect this change had on the unemployment rate was and still is quite large. Changing the denominator of the unemployment rate in this manner radically lowered the unemployment rate by about seven percentage points, from 11% to 5%.

Again, I really like your blog. But I do think it is important to note how methodological changes have impacted the unemployment rate over the years.

--Bill

 
At 2/02/2008 12:51 AM, Anonymous bob wright said...

Bill,

Do you have any url links that would enlighten me on this change in methodology?

 
At 4/14/2008 9:36 PM, Anonymous Anonymous said...

Question? To those who are definitely smarter and/or more aware of foreign Policy in Germany: When was the Federal Labor Agency created? I found 2004 but now I'm doubting myself.

 
At 10/27/2009 12:35 PM, Blogger Clarence said...

An article was recently written about germany bailing out businesses instead of finance. This to keep the unemployment rate down. However, the article, written in August, showed quite clearly that if they did not have a boost of industry in the next year or so, if the machines continued to stay silent, they will face worst economic situations than America is today.

 
At 5/23/2010 3:09 PM, Blogger chris said...

Hello! I live in Nuremberg. If you pay lots of people 1€ per hour - then you can lower the unemployment rate quite effectivly.

The first theorem of statistics is
"Don't trust any statistics you didn't manipulate yourself."

 

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