In an election year there is nothing more important to incumbent politicians than an unemployment rate that is dropping. For challengers a rising unemployment rate is a key to victory. This is an unspoken but real mantra in politics. Thus pundits of whichever side will cherry pick numbers that appeal to their position, leaving the public confused at best, and at worst ever more jaded.
Currently the unemployment rate, according to the Bureau of Labor and Statistics (BLS) is 8.1%, down .2% from July. That’s a net of 12.5 million people without work. It includes 368,000 people that are no longer counted. But how real is this figure?
According to the same BLS August report, 2.6 million are not included as they are marginally employed. That’s because these people have not looked for a job in the past 4 weeks. So instantly the real unemployment rate increases to 15.1 million (which is 4.8% of the population of 311 million Americans or 10.5%, out of 142 million, of the total workforce as per US Debt Clock). Generation Opportunity – a non-profit, non-partisan organization in the United States engaging and mobilizing young Americans – claims that another 1.7 million young adults are not counted by the BLS. Bringing the total to 16.8 million unemployed.
The key here is that the unemployment rate quoted by the Government each month is not a real figure, but an estimate meant to give a feel for the real situation in the nation. This is driven home by the fact that the unemployment rate is determined by a random phone survey of Americans to determine how many are working, looking for work, or ‘discouraged’ as the Government defines it.
So what is the real figure?
According to the Union of Unemployed Workers, the actual unemployment number is 27.6 million for an unemployment rate of 17.1% (down from July at 17.2%). This is from a union, whose purpose is of course to gain members so these figure are suspect. Nor is there a direct citing of how these figures are derived.
According to US Debt Clock, a source that is well documented and quoted, the total of unemployed in America is 22.7 million. That’s an unemployment rate of 15.9% (out of the abovementioned workforce). In 2008, on this same day, the total unemployed was 13.5 million (government reported 10 million). Same day in 2004 was 13.9 million (government 8.2 million). In 2000 it was 9.5 million (government 5.7 million).
The divergence, according to US Debt Clock, is currently 81.6% higher than government figures. This exceeds the next highest divergence, 69.5% for 2004.
Looking at it from a different view, the total civilian labor force is 154.6 million. That is down from last month, July and June. It is better than a year ago by just under 1 million. A slim improvement annually, until you look at the number of people actively working. That’s called the participation rate.
The participation rate is down meaning the number of people working compared to not working is diminishing. This is the bulk of where taxes are raised from, and a lower number means fewer dollars to pay for government spending and thus a greater need to borrow money and increase the national debt and/or increases in taxes.
The participation rate for August is 63.5%. That’s down from July (63.7%), June (63.8%), and down versus a year ago (64.1%). It is in fact the lowest this rate has been since 1981 – a year that saw unemployment go from 7.5% to 8.5% and interest rates go from 11.8% to 8.9% (both are January to December) with a US population of 229 million.
In fact the participation rate has dropped consistently since before January 2009 (65.7%). It has only moved up 7 times since 2009, and only once for more than 1 month at a time (April ’09, Dec ’09 to April ’10, July ’10, Oct ’10, Jul ’11, Jan ’12, and Apr ’12). This indicates a long-term trend of unemployment, at a growing rate.
Thus we can conclude several things:
What you wish to take from this is up to you as the reader. The clear conclusion is that no one should take solace in quoting the unemployment rate as reported by the government, nor in any reduction as seen recently.