Sunday, August 09, 2009

What's the real unemployment rate?

Last week the Bureau of Labor Statistics released data saying that the US unemployment rate was down slightly, to 9.4 %. It reminds me of the saying that Mark Twain popularized about there being three kinds of lies: lies, damned lies, and statistics.

The government removed 796,000 people from the total number of unemployed. Those people are still unemployed, but they've given up looking for jobs. So they're not counted. This is nothing new, since the Labor Bureau has always done this. But in a climate like today when we have so many people unemployed, it can really shift the numbers. When you add them back in, the real rate is 9.9%. Probably it's actually even more than that, because it doesn't account for people who are working fewer hours than before, and those who are working part time when they really want full time work.'

My point is that the headlines are a bit misleading. This isn't an economics blog, but I've been thinking about the economy a lot lately. The downturn has moral dimensions to it. While I'd like to be hopeful, I think the reality is that it will get a lot worse before it gets better.


Glenn Atias said...

The Labor Bureau has not always done this, Sister. This piece of trickery started in 1994.

If we compare apples-to-apples with the straightforward way the calculation was done in the 1930's (simply employed = yes/no for all those eligible to be employed), we see unemployment by that measure is over 16%. We're less than 1 year out from the big economic collapse last year. Since our financial collapse started in October, and the big market crash of 1929 was in October, we can "run the clock forward" and look at where we are analogously to that time period.

In August 1930, the honest way of doing the unemployment calculation that I mentioned above was at 8.9%. Some people think the market crashed in October 1929 and we fell right off a cliff into the Great Depression. But it took the better part of 3 years to unfold, and came in successive waves. So we've actually shed jobs over the last year at almost twice the rate as during the same timeframe back then.

I see where this could only be the first wave. The current stock market run-up is no more than a Generational Ponzi Scheme. We borrowed trillions of dollars from future generations for this TARP program to give it to banks, and they're now laundering it into the market through the back door. Simply shifting around borrowed money to create the illusion of a market boom.

And this so called "unemployment good news" will puff it up even further. A not-real market being puffed up by not-real good news.

We're getting nothing but one dishonest transfer scheme after another, setting us up for an even bigger fall, I fear. But such is the world of men and their money.

God Bless!


Sr. Lorraine said...

Thanks, Glenn, for your insightful analysis! Your point that we're shedding jobs at twice the rate as in the Great Depression is really important. Some people are saying that we're actually going into a second Great Depression which will be worse than the first because the financial structure is so much worse now (huge budget and trade deficits, loss of manufacturing here in the US, incredible consumer debt, etc.) So your point makes a lot of sense.