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  • Real Unemployment Rate 10.9%

    The US unemployment rate rose .1% to 8.2% in May, but wait there's more. There are currently 12,720,000 people who are unemployed who are looking for work. The labor force of the United States is 154,900,000, 12.72 million divided by 154.9 million gives us the 8.2% unemployment rate. But there is another factor that should be included in this equation. Currently the Labor Force Participation Rate is 63.8%. The average Participation Rate over the last 20 years has been 66%-67%. So if we use 66.5% as the average there is currently 2.7% of the labor force not looking for work (so therefore not in the unemployment numbers) that have historically been working or looking for work. 2.7% of the labor force is 4,182,300 people that should be included in the unemployment numbers who are not. If you add these 4.18 million people to the unemployed it gives us 16,902,300 total people who are unemployed. This gives us an unemployment rate of 10.9%.

    Most likely as the economy recovers, this 2.7% of the Labor Force will slowly start to look for jobs. So when we do have better employment numbers we will have to recoup an additional 4.18 million jobs on top of the current 12.7 million who are currently looking for work. At are current Labor Force we would have to get down to 7,745,000 unemployed for 5% unemployment. That would mean we would need to add 9,157,300 jobs to get to 5% unemployment at a Labor Force Participation Rate of 66.5%. The economy would have to add 200,000 jobs a month for 45 months to reach 5% unemployment. That's just shy of 4 years.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 02 1:13 AM | Link | Comment!
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