Jun 03 2011

Actual Unemployment Hits 10.5% In May

Major UpdateMissed this key report:

The labor force — those who have a job or are looking for one — is getting smaller, even though the economy is growing and steadily adding jobs.

By the government’s definition, if you quit looking, you’re no longer counted as unemployed. And you’re no longer part of the labor force.

The percentage of adults in the labor force is a figure that economists call the participation rate. It is 64.2 percent, the smallest since 1984.

Their decision not to seek work means the drop in unemployment from 9.8 percent in November to 9 percent in April isn’t as good as it looks.

If the 529,000 missing workers had been out scavenging for a job without success, the unemployment rate would have been 9.3 percent in April, not the reported rate of 9 percent. And if the participation rate were as high as it was when the recession began, 66 percent, in December 2007, the unemployment rate could have been as high as 11.5 percent.

- end update

One of the major problems with the way the US calculates its unemployment rate is it bases it on the active workforce, which excludes people who gave up looking or asking for unemployment insurance. The fact is, in a steadily growing nation like ours, the available workforce population expands every year with population growth. This expansion is driven by young workers and new immigrants entering every year, offsetting those who retire.

Since 2000, when the Baby Boomers began retiring, the workforce expansion was very steady – growing each year by a near linear rate. That is until the recession hit in 2008, at which point the size of the workforce began to nose dive like rarely ever seen. You can see this clearly in the following chart, which shows the US workforce size every May since 2000 (blue curve – click to enlarge). Note that it actually took a year before hope began to be lost and people gave up and started to abandon the monitored workforce the government tracks.

I did similar charts for February and for January. The trend is clear. As the US Census just completed notes, our population has not shrunk at all, so neither has the available workforce pool. What has shrunk is the portion of the workforce being tracked by the US Government.

So is our unemployment really at 9.1% in May? Actually it is not. Since the workforce size is a nicely behaving linear number which grows as the population does, we can extrapolate what the workforce would have been without the 2008 Great Recession. That is the red line on the chart and it shows where the workforce level should be.

When you recompute the unemployment number (which is those working minus the total workforce pool) the actual, on the ground unemployment is at 10.5%. This is not guess work, because we know the workforce pool grows with population, and we know the population grew from 2000 to 2010. This is not theory. The actual number of the workforce pool may be off by a few percent, but no more than the government’s number is (all numbers have margins of error).

Worse yet, the real underemployment number (U6) is a heart breaking 17.3%. This number indicates those working at jobs below their normal capabilities, earnings, etc. It includes those scraping by in part time or low end jobs, or on the verge of disappearing from the general workforce.

These unemployment numbers are averaged over all age groups. The reality is acutely painful in the hardest hit groups of recent graduates, minorities, etc.

In our recent Holiday trip to an amusement park we were stunned to see how many seniors were working in the park. Folks well into retirement age hosting food lines, picking up trash, running games. It was stunning to see. Obama’s economic disaster is far deeper and more painful than the government is willing to let on, and the left wing news media is too afraid to discover.

It matters not. The same voters who came out in a rage in 2010 will be back again in 2012. They are living the actual reality. And since there is no silver lining in sight due to the liberal policy screw ups, I feel secure in saying there will not be a Democrat led component in government come 2013. And probably for years afterwards if the GOP can stay right of center and not tip over their own fringe cliff.

Ed Morrissey has his usual good take on the numbers here at Hot Air

11 responses so far

11 Responses to “Actual Unemployment Hits 10.5% In May”

  1. WWS says:

    The seniors working at the parks are a double tragedy. Not only is it sad that they have to do this to get by, also consider that every senior you see working is a young adult who is NOT working, and who is NOT receiving an introduction to the world of honest work.

    This is supposed to be how relatively unskilled youths are given an introduction to the adult world. Instead, seniors are taking those jobs, and young adults are doing – what? Video games at their parent’s house?

    They’re sure not working. And that’s not because they won’t, but because they can’t.

  2. AJ,

    Mike Shedlock thinks “ground unemployment” as you put it should be over 11%.

    See:

    http://globaleconomicanalysis.blogspot.com/2011/06/bls-jobs-report-54000-unemployment-91.html

  3. AJ,

    The Bureau of Labor statistics now is using a quarterly rather than annual ‘adjustment’ in labor force estimates.

    This means four times as many opportunities to pad the unemployment numbers to make Obama look good in terms of media reported BLS statistics. (Soon to be called B-S statistics).

    This is what “Mish” thinks of it:

    Distorted Statistics

    Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.

    The official unemployment rate is 9.1%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

    While the “official” unemployment rate is an unacceptable 9.0%, U-6 is much higher at 15.8%.

    Things are much worse than the reported numbers would have you believe, and for the second consecutive month the beneath the surface numbers were bad-to-awful.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com

    And we have 17 more months of this before the 2012 election plus 2.5 months after that of wrecking by the outgoing Obama Administration “officials” — who will be far nastier than the Clinton/Gore people were in Jan. 2001.

  4. MerlinOS2 says:

    Obama’s Jobs Recession

    Kudlow tells it like it is even while Krugman is frothing at the mouth for supersizing another kensyian cow pie trail to fix the economy.

  5. dbostan says:

    What GOP “fringe cliff?

    Like the progressive policies of Bush or his well advised Iraq war?

    The problem with the GOP is that the conservative wing, which was in control under the Reagan admin. was BETRAYED by the progressive/check-pants repubic/Bush wing of the party.

    Yet, I do not hear too many comments about this little inconvenient fact…

  6. dbostan says:

    I forgot certain characters that underline the intended sarcasm:

    “well advised Iraq war”

  7. MerlinOS2 says:

    Progressive Democrats Of America Resolution In Support Of The Coming Hamas Flotilla

    Now one has to wonder just which ‘fringe’ really is on a scale of 1 to 10.

  8. roylofquist says:

    AJ,

    Your conclusions about the fate of the Democratic Party are precisely what I have been saying for quite a while now. True prophets are never recognized in their own time, or something like that.

    Roy

  9. WWS says:

    actually, Roy, the quote is that True Prophets are never recognized in their own hometown.

    Try that out on your wife next time she doubts you – naah, forget it. That never works.

  10. crosspatch says:

    What is really going to be a crying shame is when this young generation wakes up to the fact that our generation robbed them. We have already spent all they will ever pay in taxes in order to give ourselves a pretty good package of benefits. Once they wise up to that, they are likely to cut us off but cutting us off won’t make much difference to us since the system will go broke anyway.