Core Essays

13 January 2011

The Real and Sad Unemployment Rate in December 2010

This is another of my many unemployment updates in my campaign to correct the very wrong impression given by the commonly quoted unemployment rate put out by the Bureau of Labor Statistics of the Department of Labor.  They also supply the facts from which a more realistic assessment can be made of the employment situation.  In this last decade, the real state of employment has broadly become worse with time.  The data we need to examine is given in the table below:


The numbers reported here in thousands or percentages are not seasonally adjusted.  The BLS keeps readjusting the seasonally adjusted numbers over a three month period after they first report them, but the unadjusted numbers are solid.  There is also less likelihood that any political games are being pulled with the raw numbers.

The BLS reported, as did the press and the news networks, that unemployment went down in December from a rate of 9.8% to 9.4%.  But in reality, the number of people actually employed fell by 256,000 people, while the population of working age people grew by 174,000 people.  The reported number of unemployed people fell by 285,000 people.  Since the number of people supposedly no longer interested in working fell by more than the reduction in the number of people who were working, the official unemployment rate fell.  This is very deceptive.  Extremely deceptive.

This kind of disastrously wrong impression is why I was compelled to find a new way to look at the unemployment statistics.  There is no way to use the standard approach to indicating the number of people who want to work except in good times when decent jobs are available to people to take.  From about 1997 to early 2000, many jobs were available.  Admittedly, this was at the height of what turned out to be the dot.com bubble.  Nonetheless, it does tell us that given the availability of good jobs, about 67.49% of the non-institutional work age population wants to work.  Using that knowledge as a criterion, we see that with our present work age population, which grows monthly, we needed 161,226,000 jobs in December.  Unfortunately, due to the huge and ever-growing interference of government over the last decade with the private sector economy, we actually had 22,067,000 fewer jobs than this.  These missing jobs increased by 373,000 jobs in December.  The real totally unemployed rate was 13.69%, not the reported 9.4% rate.  This is in no way the good news we were given by our highly trusted news media.  Even Fox News and the Wall Street Journal go along with the false news momentum in these cases.

The number of missing jobs in January 2000 was only 5,689,000 jobs, but by December 2005, this number had already increased to 10,710,000 jobs.  In December 2008, the missing jobs had increased to 15,287,000 jobs and the recession was recognized as having begun, though in reality, it had just accelerated as far as jobs go.  The worst month of the recession in terms of missing jobs was January 2010 when the missing jobs were at 14.41% and number of missing jobs was 23,029,000.  The number of missing jobs then decreased until July 2010, but has increased every month since then.

Large companies have generally reported good profits since then, but they have largely held onto their income since then and done little hiring, though expenditures on capital equipment have been somewhat better.  Small companies, which do most of the hiring in decent times, have not yet seen much improvement in incomes.  The demand for labor has continued to fall through December and more and more people have given up on finding jobs.

Drastic action to cut government spending, so that the massive transfer of wealth from the private sector to governments is greatly reduced, is absolutely necessary to decreasing the massive deficits, but also to decreasing the massive unemployment.  We need desperately to reign in the many costs of employment imposed on companies by the governments.  Huge reductions in the federal, state, and local government regulations that raise the cost of doing business are also absolutely necessary.  Regulations of businesses cost about 17.7% of U.S. national income.  Limitations of production and distorted management choices cost business another $1 trillion a year.  And the government itself spends about $61 billion a year to enforce the regulations.  This massive regulatory drag on the economy needs to be drastically reduced.

Thanks to Walter Donway for pointing out these costs of regulation figures to me.  They can be checked out here at the Center for Fiscal Accountability.

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