Unemployment
What Is Unemployment?
Many people have a misunderstanding of what an unemployment rate is, or how it is calculated. It’s a relatively complex procedure and this is why they use “percent” as opposed to an exact number. Basically, unemployment is calculated by the number of people seeking employment divided by the number of employed residents in the area. This number does not include schoolchildren retirees or “stay-at-home” parents. This does not include people on welfare or disability who are not seeking employment and it also does not include self-employed people like farmers or similar professions. One can safely assume that the number of people on welfare is pretty similar to the number of self-employed so those numbers likely cancel each other out. Either way, do not confuse unemployment with welfare. Some people like to believe that welfare rates effect unemployment rates but this is largely incorrect and one can easily cross-reference the two to make that determination. For the unemployment rate to fall by 3% due to welfare, then you would expect the welfare rate to have risen by 3%. Most often, both numbers decline together, because as more people become employed (lowering the unemployment rate) fewer people require welfare as they are now employed (also lowering the welfare rate). Under Obama for example, the unemployment rate fell by 3.1% but the welfare rate also fell by 2.1%.
What we think people will find interesting:
- We think most people will find it interesting how each party seems to have an unemployment range that they strive to achieve.
- Every Republican president exited with an unemployment rate above 5% and with the exception of Kennedy and Carter, every Democrat president exited with an unemployment rate below 4%. Kennedy was assassinated during his first term and his numbers were trending down, so we can assume that he may have also exited below 4%.
- There are actually strategic reasonings for wanting lower or higher rates that we will not get into here as that is beyond the scope of this website. But both parties have a range they shoot for that will help each achieve their economic goals and principles.
Sidenote:
It is important to note that a low unemployment rate is bad. Society needs an unemployment rate. Imagine an unemployment rate of zero and you want to open a business. Let’s say it’s a factory and you need a few hundred employees. With an unemployment rate of zero, this means you cannot open that business without another business shutting down. This would mean your economy has stalled out and you have no room for growth. Typically, you want your economy to grow every year. If you want economic growth of 2%, you will require a certain unemployment rate. A low unemployment rate is not necessarily people who have lost their jobs, but rather people who are just entering the workforce. Imagine every year, millions of Americans graduate high school or college and need to go out and find work. If the number of people graduating from school is 2% of the population every year, that means 2% of our population will be unemployed and available for work each year.
A high unemployment rate may be a sign of people who are already in the workforce but have lost their job. Typically, most experts agree that a 4% unemployment rate is perfect.
THE DATA:
Here you can see the unemployment rate when each president took office and when they left. We also list the “party average” so you can get an idea of the average expectation from each party in that category. In this case, we did NOT include Roosevelt in the Democrat average as we feel those circumstances were extreme and not really a fair measure. Likewise, we also felt that adding Truman was also not really fair as those same circumstances were still pretty extreme. However, we worried this may appear like we were favoring the Democrats by removing an increase, despite the fact that we took a pretty substantial decrease away from them. So Truman was left in the average. Either way, just note that had we included both Roosevelt and Truman or removed both of them, the Democrat’s average would be even lower. So we did kind of handicapped the Democrats on this one.
