Does the Financial Times Believe the U.S. Unemployment Rate is 13 Percent?
For Immediate Release: June 5, 2007
Contact: Lynn Erskine 202-293-5380 x115
Washington, DC: A new study by the Center for Economic and Policy Research shows the U.S. unemployment rate would be 13 percent using a methodology frequently cited in critiques of Sweden's “real” unemployment rate. The McKinsey Global Institute’s calculation of Sweden’s "de-facto" unemployment rate as 17 percent — more than three times the official rate — has been cited in publications such as the Financial Times and The Economist.
"Critics of the Swedish model have used the McKinsey report to argue in favor of a radical restructuring of the Swedish labor market. We don't accept the McKinsey methodology, but if you’re going to use it, it also means the U.S. unemployment rate would be 13 percent,” said John Schmitt, CEPR senior economist and author of the report, Is the Unemployment Rate in Sweden Really 17 Percent?
In May 2006, the McKinsey Global Institute published an analysis of the Swedish economy. A frequently cited finding was that the "de-facto" unemployment rate in Sweden in 2004 was between 15 and 17 percent — about three times the official rate of 5.4 percent.
Using McKinsey’s approach and unofficial definitions of the “unemployed,” CEPR’s report calculated that the U.S. unemployment rate would have been 13.8 percent for that year (more than double the official rate of 5.5 percent). If the U.S. prison and jail populations are also included, something that McKinsey did not do in their original study of Sweden, the U.S. unemployment rate would rise to 15.2 percent.
“To make international comparisons of unemployment rates, the only sensible approach is to use the standardized unemployment rates produced by OECD. That measure puts the U.S. unemployment rate at 4.5 percent and Sweden’s at 6.7 percent for the first quarter of 2007,” said Schmitt.