Sunday, December 04, 2011

The national unemployment rate: The devil is in the details

You gotta hand it to government; they have a language all their own.

My favorite example is the government definition of a spending cut. Seldom is the amount of spending on any particular government program actually cut, whereby the government spends less tax money on a program this year than last year. No, to the government, a spending cut is actually a reduction in the annual increase in spending on that program. More is spent than the previous year; just not as much as originally planned. And that is considered a spending cut. Nice, huh?

Then there is the unemployment rate. Our local newspaper, the Sacramento Bee, had splashed across the front page a headline that trumpeted a reduction in the national unemployment rate from 9.1% to 8.6%.

Look around you. Look at all the businesses that have closed their doors, that are shuttered, abandoned, and defunct. Look at all the housing developments sitting half-completed. You are not going to tell me that the unemployment rate is only 8.6%. Guess what? It's not.

Once upon a time, when the government reported the unemployment rate, they used to report the percentage of the workforce that was out of work, but was either actively looking for work, or wanted to work but had given up looking. In 1994, the Bureau of Labor Statistics under the Clinton administration began to only report the percentage of unemployed who were actively looking for work, and it has been done that way ever since. People who had been unemployed so long that the unemployment insurance had run out and they had stopped looking? Those people - according to the government - were no longer considered to be unemployed.

Buried deep within the website of the Bureau of Labor Statistics is a frequently-updated table that shows the percentages of different categories of unemployment. The U3 row shows the "official" unemployment rate, which again is currently 8.6%. What you want to look at is U6. This tallies the percentage of the work force that is either actively looking for work, has given up looking for work, or is only working reduced hours or reduced pay because that is the only work they could find. Factor all that in, and the unemployment rate is not an unrealistic 8.6%, but instead a very believable 15.6%! Percentages like that during the 1930s indicated that we were in an economic depression. What are we living in now?

See the BLS table for yourself. It is often updated, so the numbers may have changed from the ones I reported.

"If a nation expects to be ignorant and free... it expects what never was, and never will be." -Thomas Jefferson

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