February 18, 2012

The actual unemployment 
rate is at or about 19%.
According to the United States Department of Labor, unemployment claims dropped more than expected last week, leaving the real unemployment rate at 8.3%, the lowest in 3 years.
However, is 8.3% truly the “real” unemployment rate? Let’s investigate further.

How is the real unemployment rate determined?

Determining the real unemployment rate is based on a simple calculation:  Tally the total amount of people out of work, but seeking employment, and divide that number by the total amount of people that are employed and in the work force. Well, that seems pretty simple.
The U.S. Department of Labor is continually surveying and gathering data to reach it’s conclusion, which is what we are told, the real unemployment rate.  Every week they try to obtain the most accurate numbers of people that are in the workforce and those that are unemployed and still looking for work.  To do this, every month the the Department of Labor surveys households from the  Current Population Survey, which is used as “a sample for the overall population. It would be impractical to survey every household and keep track of every unemployed person each month. Sufficiently large sample groups are used to make statistically accurate approximations for the size o fthe labor force and those without jobs.”

The current “real” unemployment rate

According to CBS‘ Money Watch, last week saw
… initial claims for state unemployment benefits dropping 13,000 to a seasonally adjusted 348,000, according to Labor Department, the lowest since March 2008. This just means fewer people are losing their jobs.
However, the number of people continuing to collect jobless benefits dropped by 100,000 last week to 3.43 million, the fewest since August 2008. The continuing claims figure doesn’t include workers receiving extended benefits under federal programs. That number has also shrunk recently. As of Jan. 28, those collecting emergency and extended payments decreased by about 22,800 to 3.48 million. This is one reason the national unemployment rate dropped to 8.3 percent last month.

So, why isn’t 8.3% the real unemployment rate?

It’s important to remember what Fed Chair Ben Bernanke told Congress last week, “It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work. There are also a lot of people who are either out of the labor force because they don’t think they can find work.
What does this mean?  It means that in order to be considered IN the labor force, a worker must be actively looking for employment to be considered in the labor force and to be counted as unemployed.  Workers that are discouraged and not actively seeking a job because there are none to be had, are NOT counted as unemployed, even if they would want to work if ample jobs were available. There are also a large amount of workers that do not work at traditional jobs, such as contractors and freelancers who may be considered employed if they are doing work occasionally, but the amount of work they are doing may be far less than a traditionally employed worker.
This very issue throws a wrench in calculating the real unemployment number. Some estimates are that at least 1.2 million people dropped off the list – those that may be discouraged, but regardless, have stopped actively looking for jobs.  In fact, today the U.S. labor force is smaller than it was two and half years ago, meaning fewer people are working and even fewer are looking for jobs. In June 2009, the labor force was at 154,730,000 people, but the current number is 154,395,000.  That’s quite a few people that have given up on finding a job.

“Seasonally Adjusting” to Determine the real unemployment rate

According to Charles Biderman:
The BLS each month reports two data series, but only one jobs number is reported by the media. Actual jobs outstanding, not seasonally adjusted, are down 2.9 million over the past two months. It is only after seasonal adjustments – made at the sole discretion of the Bureau of Labor Statistics economists that 2.9 million less jobs gets translated into 446,000 new seasonally adjusted jobs for January and December.
So, in addition to a huge number of workers not even being included in the labor statistics because they have stopped looking for work, the U.S. Department of Labor apparently does some “creative” calculating of “seasonable” jobs.  What is its formula for these its calculations?  Your guess is as good as mine.
The Real Unemployment Rate
What is the REAL unemployment rate?
According to Lubbockonline.com, the real unemployment rate takes the following into account, bringing the true unemployment rate up to 19%:
President Obama has been celebrating the 243,000 jobs created in January.  However, no mention has been made byObama or the White House that 1.2 million people gave up looking for work in January.  These 1.2 million people were removed from the group of persons who are reported to be unemployed, dropping the pretend unemployment number to 8.3%.
There has also been no mention that while Obama is bragging that he added 3.7 million new jobs, the reality of the situation is that 4.4 million jobs have simply disappeared from the United States of America since Obamabecame President.
A total of 4.7 million people have stopped looking for work since the Inauguration of President Obama.  Added to the 12.7 million, the total of unemployed is 17.4 million without work or about 11%. 
When one adds in the 10.5 million who are working part time but would like to be working full time, we have 28 million who are unemployed or underemployed.  This is an unemployment rate of 17%.
If one then adds the 2% of our population who are in jails or prisons, the actual unemployment rate is at or about 19%.
The real unemployment rate.