The 'Real' Unemployment Numbers

There are several discrepancies in the way unemployment figures are reported relative to reality. Don’t get me wrong. I am not inferring that the Department of Labor (DOL) is failing to report everything. They are reporting all the numbers needed to ascertain the actual number of unemployed persons who would like to be gainfully employed. However, they parse the numbers into categories and report the categories separately. You really have to dig into the data to get a sense of how many people are now unemployed.

DOL consistently attempts to put the employment situation into perspective (read: through a rose-tinted lens). Let’s look at the adjustments and categorizations individually and then in aggregate.

The current seasonally adjusted rate of unemployment is 8.1 percent, but the unadjusted rate is really 8.9 percent. Well, that just cut 1.2 million people off of the official unemployed list. Where did they go?

Another group that is not counted in the official unemployment number is the no longer actively searching for a job group. News flash! If you can’t find a job, have run out of unemployment assistance benefits, and have given up you are not unemployed (officially). That group, as reported by DOL, amounted to 2.1 million and was not included in the official unemployment number. So far that’s 3.3 million people that want jobs but can’t find any but are not unemployed.

Then there are the involuntary part-time workers who want to work full-time (and many of them did previously) but cannot find full-time employment. Now, let’s see, if a full-time person makes the national average wage of about $18.50 per hour they make about $38,480 (assuming 2080 paid hours per year). If that same person has to work part-time for $8 per hour (with no benefits or paid vacation) and works 20 hours per week for 50 weeks a year, they make about $8,000 per year. That may not be unemployed in DOL’s book but I’ll bet it certainly feels like unemployed. Granted, some are making more hourly and may retain some benefits. But many of those more fortunate folks have to pay for their own health insurance now for several $100 per month. I know a few in that situation. When you net it out they are still making only a fraction of what they had previously. In any event these people are underemployed in the current economy while they were fully employed previously. The number of people currently in this category is 8.6 million, according to DOL. When you add this group with the other unreported, we now have a total of 11.9 million people not included in the official number.

Finally, there is one other group that doesn’t get much notice: the reduced number of people in the civilian workforce. That number has increased every year for the last ten years, until 2008. In February, 2009 the number of people in the civilian workforce has decreased by approximately 1.2 million for the average number report for 2008. It normally grows by about 1.6 million people per year in a growing economy (average increase since 1994). If we add just the average annual increase of 1.6 million to the 1.2 million reported amount of decrease, we get 2.8 million. Now, when we add it all together, we have approximately 14.7 million people who should be reported as unemployed (or under employed).

If we add that to the “official” unemployment number of 12.5 million, the number aggregates to 27.2 million. Expressed as a percentage it is unofficially 17.6 percent.

Many people say that this is nothing like the Great Depression and point to the unemployment rate of “only” 8.1 percent as proof. I say just take it with a little grain of salt. There are differences: there was no unemployment assistance during the Great Depression. This acts as a sort of cushion or safety net to keep people from starving or losing their homes during times of temporary loss of work. The Fed is pumping huge amounts of money into the system and large employers are getting loans and equity investments by the Treasury to keep them from going bankrupt. The government insures deposits at financial institutions (recently raised to $250,000 coverage) which reduce the potential for massive withdrawals.

But the economy continues to shed jobs at an alarming rate. If we add up the increases in each of the categories for just February, it starts to get alarming: over an 800,000 increase in insured unemployed (that includes upward revisions from the prior two months as usual) and increases of from 120,000 to over 440,000 for each of the other categories, we get to a number closer to 2 million than the “official” reported increase of about 600,000. And when you look at the unadjusted aggregated numbers that represent how many people are no longer working a full-time job with benefits at 17.6 percent, it isn’t so hard to imagine getting to 25 percent unemployment from here. After all, everyone who couldn’t find work was counted in the 1930s.

I truly apologize for being so “depressing.” I am generally a glass half-full sort of person. But I just felt that a little touch of honesty would be the better policy.

So, having said that, I’d like to end on a positive note: this nation had endured much more calamity than most; we got through the Revolution, the War of 1812, the Civil War, WWI, the Great Depression, WWII, Vietnam, Riots and civil unrest, other wars too numerous to mention, racial and gender bigotry, and 9/11. If the people of this country can put aside our political and social differences, we can make it through this economic downturn or anything else that is thrown at us. The USA will, eventually, lead the world out of its economic woes and be stronger in the end because of it. That is what we do.

Disclosure: I currently own no stocks.

Comments

[AndrewWJewell:]

I think indeed our government is getting scared and has to sometime soon evaluate their policies. They know well already if this powered keg blows, it’s not going to be anything less than a French Revolution with too a return to the guillotines and heads on a pike

Similarly an honest morsel, that saddens me honestly more than it territories me

Mar 21 04:28 PM

[jstratt:]

You make several excellent points and provide a good analysis.

I agree that the government sugar coats the true unemployment rate. However I dont consider underemployed as unemployed. The information that I find important is
1) True Unemployment rate
2) The Impacted including part time and commission sales workers who are losing out
3) The total impact on average earnings that includes UE Comp, Public assistance etc.

Finally in an economy like this not counting people after unemployment stops misses reality. I assume many of those who stopped looking for work are people whose unemployment ran out.

Mar 21 06:18 PM

[Al-USA:]

Very good article, thanks for taking the time to express your thoughts. However, I don't share in the optimism that the USA will pull out of it. Quite simply, the ruling class is responsible for the "financial crisis" and it is still actively looting what's left of the Republic. They show no inclination to stop. See articles below:

Banks Counted on Looting America’s Coffers
tinyurl.com/bkezmt
www.nytimes.com/2009/0...

"Fluke? Credit crisis was a heist"
articles.moneycentral....

"Following the A.I.G. Money"
www.nytimes.com/2009/0...

"Economic Fascism and the Bailout Economy"
mises.org/story/3333

"Behind the Financial Market Crisis?"
mises.org/story/3111

Mar 21 06:32 PM

[Teutonic Kn...:]

As an ordinary citizen with ordinary friends and relatives, I could feel the effects of unemployment indirectly. Every once in a while in the past couple of months, my wife and I heard that so and so in our church group had been laid off. Then our closest friend's son-in-law was laid off, followed by her daughter-in-law as well. So these news trickled in from time to time. My wife and I have never seen something like this before over the past 30 years. So the situation must have been pretty bad all over.

With the collapse of the stock market, everyday I went back to the office and office and you could read behind the eyeballs of the folks that something sinister financially had happened to that someone. On Sundays going to church and meeting folks this happened again. The destruction of wealth is wide-spread, and hitting all, whites, blacks, asians, hispanics.

Mar 21 07:24 PM

[notsosmart:]

i said all along its all ponzi. if you double the unemployment figures you are close to the truth.all gov's play # games to minimize bad news.wall st may have killed capitalism the same as the cancer kills its host.all the paper trades is no longer investing.just a shell game with less oversight than a casino.the socalled wealth was just debt.mylocal shoe repair guy's business is booming.im sure my mechanic is doing great. now if the dumb-dumb sheeples could eat their granite counters their food costs would really go down.LOL

Mar 22 10:43 AM

[tallguy:]

Another segment of the employed that has been completely missed in all of the unemployment numbers are the self employed. Contractors, consultants, anyone working that receives a 1099 instead of a W-2 is not eligible for unemployment assistance.

Mar 22 12:05 PM

[dcb:]

I am shocked with the suggestion that our government would manipulate statistics to suit their own ends and needs. :-) LOL

Mar 22 12:39 PM

[Amitabha Mu...:]

The current steps taken by the present administration for printing money will push up and kick start the economy. It could have been done much earlier. But better late than never. Very soon the market will start going up and the companies that had to retrench its people for the lack of orders will again call them back

Mar 22 03:13 PM

[henarl:]

The unemployment figures are not the only statistics that are "massaged" by the government to make themselves look better and pacify the population {especially around election time). The CPI is notoriously managed to hold down COL adjustments to wages and social security payments and to make inflation seem more under control. GDP numbers are altered to make the economy seem better than it actually is. Orwell was ahead of his time but very prophetic.

Mar 22 05:49 PM

[Teutonic Kn...:]

henarl,

Very interesting observations. I didn't come to think about that until now; I just realized that we are in an Orwellian society. Patrick McGoohan died a couple of months ago, maybe we are all like "Prisoners" in his movie series.

teutonic


On Mar 22 05:49 PM henarl wrote:

> The unemployment figures are not the only statistics that are "massaged"
> by the government to make themselves look better and pacify the population
> {especially around election time). The CPI is notoriously managed
> to hold down COL adjustments to wages and social security payments
> and to make inflation seem more under control. GDP numbers are altered
> to make the economy seem better than it actually is. Orwell was
> ahead of his time but very prophetic.

Mar 22 11:39 PM

[Courteous n...:]

Well, I am glad you ended with a positive note. I don 't know if I would disagree with your figures. But I dont think anybody(especially in Washingtion is under any illusions that unemployment is pretty bad. Perhaps the onloy people making money are day traders. But I think projections put forward by some economists that the end of this year would be something on the order of 9 %to 10%. So, I am not too surprised by the figures you are presenting, although it doesn't make my day any brighter. Peace.

Mar 23 06:53 AM