About That Recent “Drop” in Unemployment . . .
. . . it’s a chimera. Or, if you prefer, it’s smoke and mirrors.
You may have read that the “official” unemployment rate “fell” last month to 7.6%. That means the economy is improving and good times are just around the corner, right?
Um, no – it doesn’t. That’s U3 unemployment, which is probably the single worst measure of employment when it comes to showing the true state of the US economy.
The U6 unemployment rate – the unemployment which counts all who want to work full time, but aren’t for whatever reason – stands at 13.8%. And though U6 is better at showing the true picture of the economy, even that’s misleading.
Job creation in March 2013 was abysmally bad. Only 88,000 net nonfarm jobs were added in March 2013. (Job creation totals for Jan and Feb 2013 were revised downward, too – something that seems to have become a routine thing for quite a while now.) That’s far fewer new jobs than needed to put people back to work.
So, why did “official” unemployment drop? Simple: nearly half a million Americans – roughly 496,000 – simply got fed up and quit looking for work. When people quit seeking work, they’re no longer counted when calculating unemployment rates.
Had those same folks kept looking for work, the unemployment rate in March 2013 would have risen – to 7.9%.
A far better measure of economic health is the labor participation rate. This is simply the fraction of the US civilian non-institutionalized population (essentially those between 16 and 64 and not in the military or institutionalized) that is either seeking work or actually working.
In that respect, we’re sucking the Big Wazoo.
In March 2013, the US labor participation rate dropped to 63.3%. That is the lowest US labor participation rate since May 1979 – during the Carter Administration.
According to the BLS, the US civilian labor force in March 2013 was approximately 155,028,000. That represents 63.3% of the US civilian non-institutional population. Of those, approximately 143,286,000 were employed; the remainder were actively seeking employment.
However, the US labor participation rate in January 2009 was 65.7%. If the same fraction of the population were participating in the labor force today, the US civilian labor force would be (0.657) * (155,028,000 / 0.633) = about 160,961,700. Since only 143,286,000 are currently employed, if we had the same labor participation rate today as we did in January 2009 the “official” (U3) unemployment rate would today be 10.98% – not 7.6%.
Unemployment in January 2009 was 7.8% with a labor participation rate of 65.7%. Doing the math indicates we’d need employment today of roughly 148,406,700 to equal those conditions.
What that means is that we’re more than 5 million jobs short of what we need just to get back to where we were at the end of January 2009 – 5.12 million jobs short, to be precise. But don’t worry; the current Administration has things “under control” and “moving in the right direction”.
Yeah, right. Since January 2009, we’ve seen a fairly steady decline in the US labor participation rate of about 0.048% per month – for 50 months, resulting in a net decline of 2.4%. And the trendline for that decline doesn’t seem to be leveling off, either.
I always wondered what would have happened had we reelected Jimmy the Clueless in 1980. Economically, it looks like we might just be about to find out.
Category: Economy
Did those people get fed up and “quit looking for work,” or did the government stop counting them because they lost their benefits, and are no longer reporting on their efforts in order to qualify for benefits?
Okay, all those who believe the administration about anything other than where obamaman is playing golf, vacationing, or both, please say aye. Hearing none, the matter fails and is closed. Thank you.
valerie: as I understand it, the information on which the numbers are based is largely determined by survey. If an individual reports they’re actively looking for employment, they’re counted. If they report they’ve quit looking for work, they’re not. Receipt of unemployment benefits is not a qualifying factor.
The FAQ link found at the first link in the article above appears to describe the BLS survey process briefly, but does not give many of the details.
I used the Census, not BLS, for my numbers.
90 million people are out of work. The US population today is estimated at 315,631,124 (source: http://www.census.gov/main/www/popclock.html).
My handy dandy calculator divides 90 million by 315,631,124 and I get 0.285. So 29% of America is unemployed. Children living in households (according to the 2010 census) is
72,321,000. 15-17 year olds are 11,842,000 (15-17 year olds, which provide a large portion of the part-time no/low experience workforce are competing with college graduates with 2 years of experience).
The elderly (defined as 62 or older, plus Jonn), as of 2010, were 49,972,181, of which were under the age of 65.
So the US population who fall into the ages for work (15-62) is 205,179,943.
So the math changes to 90,000,000 divided by 205,179,943. My calculator gets 0.438 – so 44%.
So America’s actual unemployment rate is around 44%… not 7.6%
If you strip out the legitimately too-disabled to work, stay-at-home spouses, or too old to work (is there such a thing?), and add in all the undocumented Democrat voters, the numbers will change.
DaveO: census numbers are irrelevant for unemployment calculations. They count everybody – including many individuals who by law or physically cannot work and are excluded from labor calculations.
Those < 16 years old and those who've retired and/or are disabled and who are not looking for work are eliminated from consideration off the top. Ditto those who are full-time members of the military and those who are institutionalized. Upper age cutoff is generally 65 unless the individual is still working or looking for work. The result is the "civilian non-institutional population", which is the base number against which civilian employment calculations are made. For Mar 2013, the US civilian non-institutional population was approx 244,995,000. Common sense says that's about what you'd expect when you removed those aged 0-15 and those who are incarcerated, serving on active duty, disabled, or permanently retired due to age (65+) and not looking for further employment from the total US population. So I don't think you need to worry about the BLS numbers being rigged. Being misrepresented or misunderstood? Different story.
To the simple minded among us, the “unemployed” are those not employed as in not drawing a paycheck. It doesn’t really matter why – the productive support those not producing be they children, spouses, or totally dependant persons who are physically handicapped.
Do not misunderstand – there is a huge distinction between working and being employed. If you own your own business, you are certainly working but are not employed by someone else and spouses who manage a household work plenty hard.
But, putting someone who could be working but is not in a category other than unemployed is assinine.
Hondo – I doubt your conclusion because I doubt the source of numbers you’re crunching.
According to the BLS (source: http://www.bls.gov/cps/cps_htgm.htm):
“There are about 60,000 households in the sample for this survey. This translates into approximately 110,000 individuals, a large sample compared to public opinion surveys which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States.”
So a survey of approximately 110,000 people gives the BLS (and us for this discussion) its numbers. In Fire Support, this is called the TLAR system: stick your thumb up in the air to aim while saying “This Looks About Right.”
The BLS numbers are the low end of the spectrum, and mine are the high end. Even splitting the difference more than 1 in 4 legal Americans is out of work.
As an aside, there are accurate numbers gathered by our government, and its easy to create feeders from different databases like Social Security Retirement (extracting population over a certain age, or focusing in on disability retirements for review of legitimacy [meaning the adult babies: http://valorguardians.com/blog/?p=23477%5D) to get accurate numbers.
Putting out accurate data and information is not in the interest of either party right now.
@4 & 5, either way you slice it, the numbers “are too damn high”. And the media regales us with slobbering over Mooochelle, golf stories, and “evil” Americans and their guns.
Thing is, the POTUS doesn’t really do anything for or against unemployment. Congress can, in the form of federal hiring or a WPA style program, but their latest fecklessness prevents them from solving any problems. What this really shows is just how horrible our ruling class is at managing the economy
DaveO: statistically, a sample size of 60,000 is more than enough for a very high confidence level in the results. That’s basic stats.
And in point of fact, the BLS comes up with a higher number for the potential civilian workforce (244+ million) than you do (just over 205 million). I’m also unclear as to where that “90 million out of work” number you threw out there comes from – unless you’re including people like stay-at-home parents, caregivers, and full-time students who have no desire to hold down a job due to other responsibilities. “Not working” is not equal to “out of work” unless you want to work and can’t find a job.
By the way: don’t ever buy the idea of the SSA having completely accurate numbers. Due to the way the system was designed and implemented and the use of 9 digit Social Security numbers with a regional numbering plan for years, there are already a fair number (no pun intended) of known SSN collisions (e.g., 2 or more people with the same SSN). And that’s not even addressing the issue of those SSNs obtained fraudulently as duplicates.
@5 – Also, Hondo, they don’t count those of us who are officially retired, i.e., receiving SocSec and/or pension benefits but are working for ourselves, because we are not within the survey’s parameters until or unless we are earning money.
If, for example, my labor pays off, I will be required to pay self-employment taxes (Social Security and Medicare on your tax form) as well as Federal income tax and state income tax.
I don’t know how self-employed people are counted in those BLS statistics, but they must count somehow. Maybe you could shed some light on that.
isanova: wrong answer, amigo. The POTUS signs legislation. If he refuses to do so – or makes it know he won’t compromise, and holds out for legislation that is economic idiocy – then he can royally screw up the situation. Ditto if he willingly signs legislation that is counterproductive and/or unsustainable financially.
IMO, exactly that has been going on at least since 2006, and maybe well before.
Ex-PH2: dunno. The info I’ve been able to find on the details of the survey is scant, and I don’t have a huge amount of time to devote to the matter.
My working assumption is that it’s self-reported in that case as well. Whether folks who are self-employed and 65+ are categorically excluded or not, I can’t say. Nor do I know if those who categorize themselves as self-employed are further queried as to whether or not they’re making a profit. They may not be, as IRS rules (a personally-owned small business is only required to turn a profit 3 years out of 5 to avoid being categorized as a hobby by the IRS, and only 2 out of 7 if the activity involves breeding, showing, training or racing horses) may or may not be applicable for BLS labor-tracking purposes.
Hondo,
“Basic stats” oh really? I could get 60,000 households in Tarrant County Texas, or Fairfax County in Virginia and get radically differnt numbers from Wayne County, Michigan or Orange County, California.
You are presupposing there is integrity in this system.
I would like to look at this another way: how much money does it take to keep society running on its very basics (basic government services)? How many people working will it take to reach that amount to keep society going, and have an economy that supports life outside of government?
Those numbers are the standard for employment: above the standard = gravy train. Below the standard = shit got deep.
There are now fewer people working than at the beginning of Reagan’s first term. Guess we need another Reagan to fix that, but with so many addicted to the dole, I’m not holding out much hope.
docstew: actually, no. There is a smaller fraction of the potential US civilian workforce working today than when Reagan took office. However, in terms of raw numbers there are many more people working today. Population gain since 1981 forces that.
— break —
DaveO: suit yourself. The BLS survey is allegedly designed to mirror the US population demographics. All good scientific surveys are. You can accept that or not as you desire.
But riddle me this: how do you know the Census data you’re using is any more accurate than BLS numbers? IMO census data is even more subject to political influence and shenanigans than BLS statistics. Why? Because Census data is used for Congressional redistricting decisions.
My point: if you start questioning the basic data, you have to throw all of it out unless you collect it yourself – or you have to assume your source is accurate and accept the risk that it might not be. I see no inherent reason to doubt one vice the other (BLS or Census), particularly since they appear at a quick glance to be broadly consistent with each other.
The country needs approximately 250,000 jobs per month to keep unemployment levels from rising. That is the break even point. We added 88,000 jobs last month. The math is pretty simple. We lost jobs and the unemployment rate should have risen. They’re fudging the numbers, plain and simple. We’re not talking just about putting those to work who lost their jobs during the downturn. There are thousands of people every month who are attempting to join the workforce as well.
The administration: Good news! We added 88,ooo jobs last month. The numbers aren’t where we would like them but we are moving in the right direction.
Reporter (from marginalized paper): How many jobs were lost last month and are you discounting those who ceased to look for work or were otherwise dropped from the unemployment rolls?
The administration: Good news! We added 88,ooo jobs last month. The numbers aren’t where we would like them but we are moving in the right direction.
Hondo: suit yourself, but there’s no story in reporting inaccurate numbers, just propaganda in the hope of hysteria.
Bill R: no, the numbers aren’t fudged, and no – adding 88,000 jobs doesn’t constitue a net loss. But the method of calculating U3 does allow seemingly nonsensical results when large numbers of people quit looking for work.
As you state, the economy needs on the order of 250,000 new jobs monthly to keep pace with net new entries; only 88,000 new jobs were created in March. However, nearly 1/2 million (496,000) persons quit looking for work. Since calculation of U3 unemployment omits those who’ve quit looking for work from consideration, the fact that nearly twice as many folks quit looking for work as new jobs required to keep pace allowed a small drop (0.1%) in U3 unemployment even though there was insufficient job creation.
In fact, under the right conditions it’s even possible for U3 to go down when there is an actual net loss of jobs, provided enough folks who are looking for work also quit working during the measurement period. That is one reason that U3 is an absolutely lousy measure of overall economic performance. You can’t simply look at U3 and get any good idea as to the overall economic “big picture”.
DaveO: regarding your use of census data in comment 7 above – you might want to look at your own comment 19 and take heed. IMO, what you argue against in comment 7 is exactly what you are doing yourself in your “analysis” in comment 7. An alternative possibility is that you are using good data in a manner that is both inappropriate and misleading.
If you want to define a new method/measure of unemployment, by all means do so. But you need to (1) define it precisely, (2) explain it so that it can be understood by others, and (3) also explain why it is better than the existing measures that are commonly accepted and used. You haven’t yet done that.
What I’ve done here is take existing, accepted measures and methodology and briefly explained (1) their shortcomings, then (2) added other current, accepted measures and supporting data, then used those additions to explain why the overall situation is nowhere near as rosy as the current Administration and/or the MSM would have one believe. I’m sorry you apparently missed those two latter points.
Is your local drug dealer counted as employed? Bet there is a significant number of them across the country. And hows about all the household staff who are paid under tables? Add to that all the others who work on docks, bagging groceries and whatever else is going on tax free and the numbers would be astounding.
For that reason alone I would posit that any numbers reported could never be accurate. Or are at least fairly meaningless.
(Not disagreeing with your analysis, btw, Hondo. If the methodology remains the same over time, even if it is a flawed methodology, there is some comparative value to the reported results.)
Hondo, that is what I am doing – rethinking the problem and considering the metrics by which I can sort it out. The math is easy, but finding all the sources of input, comparing their numbers and levels of accuracy and such takes a bit more than a beer. The mathematics and science of this all of which is rather reminiscent of Asimov’s Foundation.
Hondo: I know how they figure out the U3 figures but I still believe there is some number fudging going on. How do they know a half million people simply dropped out of the market to find a job. Only one way they can really assume that and that is their unemployment benefits ended. That doesn’t mean they quit looking for work. In fact I would make the case that they are now actually looking for work since they have no more income from the government. Or maybe it’s because they are now applying for welfare. Also, I lost my job and was unemployed for almost a year and a half. I was never on any list because as a military retiree I am ineligible for unemployment compensation. How many more out there are like me? They’re using very bad math to make the stats look good for Obama, they know it, and the make believe media is going along with it.
That recent drop in unemployment is about as accurate as the “overwhelming support” of the current gun control legislation….
The current MSM is so busy sucking Obama’s BS through a straw they’ve cut off the oxygen to their brains….because they love this guy any nonsensical sh1t that comes out of the WH is unquestioningly reported as truth….were this the previous administration I doubt they would be fawning all over themselves and telling the rest of us how lucky we are to have such an enlightened and intellectual man in the WH….
These folks just report what they want, facts and figures be damned…
88,000 job increase last month.
81,000 went on SS disability.
Yeah, what could possibly go wrong with this?
If the BLS used the statistics from state departments of employment, which is where you apply for unemployment compensation, the numbers probably would change. I have never understood how calling someone and asking if they’re looking for work is a valid way to do this. Most state DOLs require that you report where and when you’ve been looking for work. That is more valid than a phone survey.
Let’s see, I’ve been looking for work in my field for three years. No luck, in part because most people are applying for over a hundred positions before getting hired. I’m not there yet. I’m working part time at one place, doing free-lance work at another, and helping take care of aging family members in exchange for a place to stay. I’m going to try and pick up another part-time job this summer. Tell me again how well the economy is doing?