Recently I wrote "Why The Real Unemployment Rate Is 16.9%"which sparked quite a few e-mails revolving around the issue of the way the Bureau of Labor Statistics measures unemployment. In that article we discussed the differences between the U-3 and the U-6 rates and showed what unemployment would look like if you included those that had been out of work longer than 52 weeks. In reality the problem is far worse - as I stated previously: "In reality this calculation is still not accurate, and on the low side, as there is currently no clear way to measure the millions of individuals who have disappeared into the abyss of the uncounted. Many of the 88 million individuals that are currently unemployed, and not counted by the BLS, would likely be more than happy to work given the opportunity. However, in the current economic environment, those options are not widely available which is why there is very much a silent "depression" running through the underbelly of this economy. In this depression we don't see the bread lines and soup kitchens simply because they arrive electronically and in the mail."
Correction - Unemployment Is Really 22%
In 1994, under the Clinton Administration, the Bureau Of Labor Statistics (BLS) changed the methods in which it calculated the levels of unemployment in the U.S. While the changes appeared to be minor on the surface at the time - the impact today is likely far greater than originally imagined. (for more detail on the changes read here)
According to the Bureau of Labor Statistics (BLS) the U3 measure is described as “total unemployed, as a percent of the civilian labor force (official unemployment rate).” That rate, as of the most recent release is 7.8%. However, if we look at the U6 measure which includes the total unemployed (U3), plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers - the unemployment rate now jumps to 14.7%.
However, while the U-6 is a more complete picture of unemployment in the U.S. it still falls short as it does not count those that are considered to be "Not In Labor Force." These are individuals that have been unemployed for so long that they are considered to have given up looking for work. However, while in more normal economic times this may be the case, in a "balance sheet recession" economy the actual unemployment rate becomes distorted.
The chart below shows the trend of individuals that are considered "not in labor force (NILF)" both before and after the 1994 revisions by the BLS.
You can clearly see that something has gone awry between the pre- and post-1994 calculations. The reasoning by the BLS gives you the answer: "(P)rior to 1994 persons were not asked whether they had searched for work recently. If they gave one of the five 'discouraged worker' reasons for not looking for work in the past 4 weeks, they were assumed to have 'given up' the search for work, although they weren’t asked when they had last looked. As a result of the greater specificity introduced in 1994, the number of discouraged workers was cut approximately in half, from about 1.1 million in 1993 to 500,000 in 1994.”
Roughly 600,000 works were wiped off the roles of the unemployed register with a simple adjustment to the calculation method. The next chart shows you the number of individuals falling into those five "discouraged worker" categories and assuming to have "given up" looking for work. As you can see, since 2009, that number has soared which gives rise to the concern over the current method of calculation used by the BLS.
Twinsdad's comments.... first follow the link...
Second take back the office of The President, control of The Senate and maintain control of The House!
Expect the last week of January '13's unemployment rise dramatically as the current Czars, Czarinas and assorted apparatchniks apply for benefits.
ReplyDeleteI wonder if Barry and Marie will apply?
Marie is too busy eating cake....
ReplyDeleteCarrot sticks cake :)
DeleteI would like to see the talking heads explain an immediate turnaround in the unemployment situation just because we have elected a republican administration. I haven't seen a great change in the direction of government in a long time and I wouldn't expect one under Romney.
ReplyDeleteWhat would you say is the major force behind businesses off-shoring all of the good jobs? How many people are going to be displaced by technology in the near future? How in the world are we going to change these major forces? It seems to me that everyone is going to need to become a trader in securities of some sort or another. That would be better than calling them welfare recipients. Maybe we need to have Chinese level population controls. A nice big war would be a good start in knocking down the unneeded workforce.
"It seems to me that everyone is going to need to become a trader in securities of some sort or another."
DeleteThis is another stunningly accurate statement that is totally lost on most people. Whether we are talking about things like day trading, or flipping houses, there has been at least one complete generation of people who have bought into an idea that the quickest and best way to build wealth is to buy and sell things. Not build things and save and reinvest, but buy low and sell high with as little effort invested as possible.
How many kids coming out of school today want to make something with their hands? Even if we brought back manufacturing jobs, we very likely would not respect those who held them, and we certainly wouldn't want to have the inflation in price that would come with buying goods produced by Americans who made a living wage. Your closing statements are just as good and just as accurate, the typical way humanity solves these problems is by a reduction in population.
I've been of the opinion when several billion people in the world are desperately poor, and have the opportunity to work for what we consider a low wage, people in countries such as ours will need to face up to the fact that competition exists. True, there are labor laws, environmental regulations, and other factors that provide advantages, but I think what one is willing to work for is major. Those other factors can, are, or will be dealt with. In the U. S., from what I've seen and read, the primary cause for job losses is the failure to recognize the need to compete, and by that, I mean swallow hard and work for a little less. At all levels.
DeleteJean
"the primary cause for job losses is the failure to recognize the need to compete, and by that, I mean swallow hard and work for a little less. At all levels."
DeleteEvery time I see this comment, I pray that the person who said it loses their job and is forced to take a similar job for a lot less money.
Max,
DeleteI did, and I had to. I hope that makes you happy. It may as well make someone content. For what it's worth, I was grateful to find another job, even for a lot less money.
Jean
Max,
DeleteI omitted a request of you:
I'd be interested to know what pleasure you derived from my revelation, and why. A reasonable request, yes?
Jean
Actually Jean, I don't take pleasure in it at all. I was basically automated out of my job and the nearly 80k pay cut I took that my customers saved and kept for themselves, was money taken out of the economy. What we have done in this country is nothing more then redistribute income from workers to owners of capital. No doubt there are people happy with your loss and their gain. I'm not one of them.
DeleteThere is a axiom out there that is getting very long in the tooth, namely that it is entirely the fault of American workers that our economy has collapsed. I won't argue workers are not to blame, but at a time when wages have been flat while profit has literally skyrocketed, it's time to call greed for what it is. Right now, we have collectively decided that what must happen is for ALL American workers to continue to lose standing, wages and benefits. Since my job as a nurse can't be outsourced, I have some security, but only for the moment. I have no doubt some rich asshole somewhere will find a way to start taking that away too, or some punk like Paul Ryan will claim healthcare is so expensive because nurses make too much money.
So, I don't take pleasure in your downsizing at all. If you believe all American workers need the same "lesson" in competitiveness that you received, then Romney is certainly your guy.
This comment has been removed by the author.
DeleteMax,
Delete(had to edit this, but couldn't, so I deleted the original)
I don't think American workers need a lesson. I merely stated one aspect of reality that I think needs to be faced. Nothing more. I'll take you at your word, but as you pointed out in another exchange, you say one thing, and then say another. Sort of. You did say "I pray that . . . ", implying at least some bittersweet satisfaction would be gleaned. In any case, my job switch occurred several years ago. Just the way it goes.
Thank you for replying.
Jean
You probably didn't mean exactly what I interpreted, but, when I see a statement that sounds like "workers are the problem because they don't want to be competitive" it spikes my annoyance. It's much less aimed at you personally than it is a angry assault on the logic. An illegal Mexican waiting in the parking lot of Home Depot makes too much money compared to someone in China or Vietnam. These days, many statements are accepted without question. One statement is that American workers aren't competitive. Compared to someone making 30 cents an hour, no they aren't. Compared to someone in an economy like Germany's, it's a different story. We have chosen to shift money away from American workers simply to engorge the profit of multinational corporations who want all of the protection of being a "citizen" of America while contributing comparatively little to it's upkeep. While the logic makes me see red, I don't like seeing anyone get slapped down unless they are a Trump like jerk.
DeleteThe UE numbers are strictly from survey of 60K families in towns of more than 25K people.
ReplyDeleteWhat's the problem with the process.
1. It lacks true facts and is a small sampling of the US.
2. When you do not survey under 25K it shews the number upwards as small towns generally have a higher rate.
3. How do you account for the 2 million new illegals eligible to work?
4. How do you count the illegals in the country?
The UE is just what it is. An unreliable number that can be tweaked and twisted to meet a political agenda.
"The UE is just what it is. An unreliable number that can be tweaked and twisted to meet a political agenda"
DeleteWhen the number is used to make precise statements, I agree entirely that it is bogus and that is partly what I am baffled so many people were spitting hairballs over the recent small drop to just under 8%. They only thing I can conclude about it is that people like Jack Welch must understand that a majority of people no longer bother to think critically about the data they are looking at and that they will respond to what is nothing more then a talking point.
As a general, very broad brush indicator, the number stated by the government does still have some relevance, but not to answer precise questions like you are asking Lou or to support a claim that ANY POTUS did something magical to move it.
Hey Max.
DeleteI find it unbelievable that the media gives it such credence. It really isn't a reflection but a snapshot taken by bureaucrats. The data is subjective and affected by the people who do the survey. Want it to look better focus on areas of the country, i.e.the Dakotas for one of your 30% blocks. Want to make it look worse, focus on a Detroit. All in all, a piece of garbage used to hype or tear down an administration. Best part is most people in the US think the number has some meaning.
"In 1994, under the Clinton Administration, the Bureau Of Labor Statistics (BLS) changed the methods in which it calculated the levels of unemployment in the U.S."
ReplyDeleteFINALLY!!! I found this info in a PDF file on the BLS web site and have been putting this little fact out there for a while. Thank you for writing about the great distortion in the unemployment rate. Not only does Clinton's change greatly distort the unemployment rate, so does the number of people on disability. AMERICA IS HURTING and there is NO GOOD NEWS about employment. THROW OBAMA OUT OF OFFICE~!
I agree about ditching The Hindmost. I also agree about the way the BLS calculates unemployment. However, it is a protrayal regardless of the administration, so in one sense, it shouldn't make a difference. I prefer a number that would at least include those without a job, who are in the labor force age range, who do not have a job. Simple, I think. And a bit more meaningful.
DeleteJean