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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • More And More Discouraged Workers 4 comments
    Oct 7, 2012 3:10 PM

    This following graph should be concerning. We have government statistics (grey and red chart) and we have the real SGS Shadowstats statistics (blue chart). The key statistic to look at is that of the discouraged worker.

    Let's go over the definitions first. A discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment. This is usually because an individual has given up looking or has had no success in finding a job, hence the term "discouraged".

    This discouraged worker includes two categories: short-term discouraged (less than 1 year) and long-term discouraged (more than 1 year). The government statistics only show the short-term discouraged workers (U6). Why do you ask? Political considerations, to improve the statistics and this is especially true after year 2009 as we will see below.

    Since 1994 Shadowstats has included long-term discouraged workers. Long-term discouraged workers are those people that are out of a job more than 1 year and I don't see a reason why they aren't counted in the statistics.

    Official unemployment rate (U3) is 7.8% right now. Unemployment rate including short-term discouraged workers (U6) is 15%. The real unemployment though (NYSEMKT:SGS), is 23% (Chart 1). This SGS unemployment counts in the long-term discouraged workers upon the U6 number.



    (click to enlarge)
    Chart 1: SGS Unemployment Rate

    Now, what concerns me a lot is that the blue chart has been doing something weird after year 2009. Previously, the blue chart always followed the U3 and U6 unemployment numbers. But since 2009 (after the economic crisis), the blue chart kept going up, while the other red and grey charts are going down. This is a serious deviation. It means that the class of long-term discouraged workers has been massively increasing. It also means that the short-term discouraged workers just can't find a job. That's why they are being added to the long-term discouraged worker category. This only started to happen after 2009. This is also the class of unemployed people that are most unlikely to find a new job due to the length of the unemployed period. The real unemployment rate is now almost on par with the unemployment rate of the Great Depression (25%).

    You can be sure of this, the economy isn't doing as well as it seems.

    More info here:


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Comments (4)
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  • SMaturin
    , contributor
    Comments (2268) | Send Message
    Not to worry. By John Williams' estimate we are still in better shape than Spain or Greece.
    7 Oct 2012, 09:08 PM Reply Like
  • ChrisHorton
    , contributor
    Comment (1) | Send Message
    Thanks for putting this out there. It's really, really important to keep saying this. Williams' figures are very close to the reality perceived by regular folk, but members of the "political class" - administrators, (tenure track) academics, politicians and their staff, executives, policymakers of all sorts - live as though the official "headline" rate, U3, is real, and almost all debate, public discourse, media reports, research and legislation is based on U3. This makes taking action around unemployment, or arguing that it is still an emergency, much more difficult.


    So keep telling it, bro, and don't shut up for anyone!


    Worcester Unemployment Action Group.
    26 Aug 2013, 10:07 PM Reply Like
  • Joe Adams
    , contributor
    Comments (2) | Send Message
    Can you get the data to back up the difference between the U6 and the blue line given by SGS? I'd like to run the numbers and verify
    25 Feb 2014, 03:02 AM Reply Like
  • Joe Adams
    , contributor
    Comments (2) | Send Message
    Could you share the dataset that underlies the difference between the SGS data and the U6 data? Or point to the data at the BLS. Thank you
    25 Feb 2014, 08:46 AM Reply Like
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