Friday, July 8, 2011

The Unemployment Rate, When Factoring In Government Statistical Manipulation, Is At Record Levels

I wrote before that our unemployment rate is actually much higher than the reported rate, as millions of people have been statistically thrown out of the labor force.  Given today's horrible jobs report, I felt it was time to update some of my calculations.  First, you can see our labor force participation rate is at a 27-year low (the lowest since March of 1984), falling almost 2% since Obama was elected. 

This is why the reported number looks lower than reality.  By kicking people out of the labor force, a greater percentage look employed, or conversely, you can't be counted as unemployed if you aren't counted in the labor force.

So what happens if you assume a constant 66% labor force participation rate (it was at or above 66% since the late 1980's) since November 2008?  Well, you get a much higher unemployment rate, as you see in the graph below, where the red line is the official rate while the blue line is what is probably the "real" rate.

As you see, if you keep the labor participation rate constant, not only is the rate higher but all the improvement we've supposedly seen, disappears.  As of this latest unemployment release, our unemployment rate is 11.8%, tied with the highs of December 2009 and November 2010.

In case you don't believe me and think I'm resorting to statistical shenanigans, check out the official employment-to-population ratio which is a statistic which does not account for the size of the labor force, just the total population over the age of 16.

As you can see, we are tied for the recession low level of 58.2%, the lowest since August of 1983.

These jobs numbers are disastrous and have nothing to do with the deficit talks, as Obama claimed.  Nor will they be fixed by more infrastructure spending.  As these charts show, the previous round of infrastructure based stimulus had almost no effect on employment in this country.  It's really amazing how Obama really has nothing new to say or to propose on the subject of jobs creation, it's just always about helping out his union buddies and higher infrastructure spending.

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