Not-Working Rate instead of Unemployment Rate

The unemployment Rate in the United States decreased from 7% in November of 2013 to 6.7% in December of 2013.  Good news! Or not?

Unfortunately the unemployment rate is not a beatific 'economy health indicator'.

How come?

Unemployed who no longer search for a job are not 'counted in'.

Do we have a better labor economy health indicator?

An index that would probably be better related to the health of the U.S. economy would be something like the 'Not-Working Rate', implicating the partition of all the people (age 16 or above) that are not working, divided by the number of people that potentially could work.

In fact we can define the 'Not-Working Rate' more or less as 100% minus the 'Employment-population rate'.

'Not Working Rate' = 100% - 'Employment-population rate'

According to chief North American economist for Capital Economics Paul Ashworth,, the employment population ratio is one of the best measures of labor market conditions. This ratio is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64) that is employed, inlcuding people that have stopped looking for work.

Enough index-talk discussions... let's look at the Not-Working Rate outcomes.

Not-Working Rates 1948-2013
Let's compare the Not-Working (NW) Rates with the Unemployment  (UE) Rates.

The next chart clearly shows that the NW-Rates are about 4 times the UE rates.
In other words: Unemployment is only a small part of 'Not Working'......

Not-Working Rates 2000-2013
Let's zoom in to the development of the 2000-2013 rates.

Now it becomes clear that the UE Rate keeps up with the NW Rate approximately until the UE Rate in October 2009 hits the 10% ceiling. After that (coincidence?) the UE Rates starts a spectacular downfall from a 10% to a 6,7% level at the end of 2013. However the percentage of people that are not working stabilizes around 41.5% and doesn't  decline!

Let's zoom in to detect this remarkable development..

Conclusion
I'll leave the detailed conclusions up to you.
My main advice is to introduce the 'Not-Working Rate' as an indicator for the labor health of the U.S. economy.

Despite all this labor math, let's hope and pray that people find a job and that the U.S. economy recovers!


Sources/Links:
- BLS Employment-population ratio
- BLS Unemployment rate
- Wikipedia Employment-to-population ratio
-  Actual U.S. Unemployment Rate
- Cartoon

Transparency in a World of Bribery?

To create a world that is less vulnerable to systemic risk, it's important that financial markets become more transparent.

One of the main issues in becoming transparent is the fact that there's still a lot of corruption in the world.

According to 'Transparency International', more than 1 in 4 people around the world report having paid a bribe.

The Netherlands
Even in a  perceived 'low bribery country' as The Netherlands, bribery is a serious issue that still isn't seriously approached. According a OECD report, The Netherlands is failing to vigorously pursue foreign bribery allegations and must do more to enforce its foreign bribery laws.

Fourteen out of 22 foreign bribery allegations have not triggered the opening of an investigation, calling into question the Netherlands’ ability and proactivity in investigating and prosecuting theses crimes.

Transparency Rules
It's useless to set up (financial) transparency rules (like in EMIR) if bribery is still a substantial part of our culture.

The 'Corruption Perceptions Index 2013' shows that even in countries where one would expect a low corruption rate, there's still a lot to improve. Despite of all actions and intentions: worldwide corruption still increases. Therefore it's time for action:

Words must be backed by action

The Corruption Perceptions Index scores 177 countries and territories on a scale from 0 (highly corrupt) to 100 (very clean). Not one country has a perfect score. Two-third of all countries have a score below 50. This indicates a serious, worldwide corruption problem. Hover on the map above to see how your country fares.




What follows are the more detailed scores in a complete list of all countries. Just Scroll down to your own country to find out there's still room for improvement.




Finally 
It will not be easy to achieve an adequate transparency level in a world full of Bribery. Let's discuss what we - actuaries - can do to stimulate integrity and accountability, as these values are crucial to a more risk free world

Relevant links and Sources
- Institutions perceived by respondents to be among the most affected by corruption 
- Complete Oversight of Indexes
- Corruption by TOPIC
- OECD: Netherlands must significantly step up its foreign bribery enforcement
- Bribery Report The Netherlands

Happy 2014 !!!

Happy New Year to all Actuary-Info Readers!!

May 2014 become a fabulous Risk Management Year.

Wonderful Art by Rob Gonsalves ("Deluged").

 Link: Rob Gonsalves