Unemployment in the US

The official unemployment data are notorious for their ability to hide, mislead and distort. The media are notorious for exactly the same thing. This is an article about the actual depth of the unemployment problem in the US at this very moment.

The national unemployment rate ticked down slightly to 5.4 percent in April — a rate not seen since May 2008 — the U.S. Bureau of Labor Statistics recently reported. Although this is welcome news, government statistics mask economic troubles that continue to plague millions of Americans years after the end of the last recession. For starters, the widely-reported “U-3” unemployment rate only includes those who are actively seeking employment. And more and more job-seekers are getting discouraged and giving up the job search altogether. This is why the unemployment rate has declined even as the civilian labor force participation rate has dropped significantly from its peak of 67.3 percent in 2000 to 62.8 percent today — hovering near a 37-year low.

The broader U-6 measure of unemployment, which includes those who want to work but have gotten so discouraged by their unsuccessful job search that they have given up, and those who want to work full-time but have had to settle for part-time work, remains double the U-3 rate, at 10.8 percent. But even this does not provide the full unemployment picture. In 1994, the BLS stopped including long-term discouraged workers, who have been unemployed for more than a year, in its statistics. Reinserting this group would yield an unemployment rate of 23 percent, according to John Williams of ShadowStats.com. A Harris Poll reveals the depths of would-be workers’ despair, finding that fully 40 percent of those unemployed have given up looking for work.

For more than six years, increased government spending and the Federal Reserve’s quantitative easing and zero interest-rate policies have failed to restore prosperity, succeeding only in fostering more debt, reinflating the equity and housing bubbles for the next crash and destroying any incentives to save or eliminate malinvestments. Until these monetary and fiscal policies are reversed, expect more boom-and-bust business cycles, more erosion of lower- and middle-class wealth and more massaged government statistics. [My bolding]

This is seriously a worry. I used to adjust our own unemployment rate for shifts in the participation rate and still look at the number. But we have a bit of a slide but never more than a percentage point. In the US it has fallen by almost five percentage points. That is a large number of people to go missing. But 23% on the old way of calculating the number is astonishing if there is no double counting involved which there may be. But it is much more than 10%.

You really do have to wonder how innumerate the opposition parties are, or even if they are interested in also hiding the reality rather than confronting a problem that may be unfixable, given the nature of politics at the moment. If it really around 20%, it is as bad as it was in the middle of the Great Depression.

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31 Responses to Unemployment in the US

  1. mundi

    I don’t understand why 5% would ‘give up” . Does this mean welfare is so high the don’t need a job, or they have decided to stay at home and be single income family? Or they have decided to starve in a ditch? Or they are all doing cash in hand work hidden from the government?

  2. Tim Neilson

    Mundi, as I understand it US taxpayer funded welfare cuts out after a while. So all of your hypotheses except the first are possibly valid.

  3. maman

    Steve , is the link in the first paragraph you wrote working ok?

  4. Kingsley

    Given median household income is still down about 8% on pre GFC it would seem a real unemployment rate of significantly above 10% is quite plausible in the States.

    If you really care about inequality that’s what you should care about.

  5. .

    I am over the moon that Shadow Stats and U6 are being mentioned here.

    It would be great if a similar figure was produced here, with more certainty than the otherwise excellent Morgan Poll figure.

    A simpler metric for the US is the amount of those on Food Stamps.

    Truly terrifying stuff.

    QE etc will only continue to stop markets from clearing.

  6. Kingsley

    Link does seem to be broken

  7. notafan

    I think US unemployment benefits run as a type of insurance scheme whereas welfare is forever.

    US welfare link

  8. Kool Aid Kid

    I haven’t followed the game, but I recall back in the 1980s being told by my staff that the adjustments to unemployment definitions at the ABS had made retrospective comparison irrelevant.

  9. Lem

    Lies, damned lies, and statistics.

    Government statistics are the biggest lies of all. How they can tell them when anyone with half a brain interacting at a societal level can see what has/is going on shows the level of disregard the elected have for their people.

    For many months right here on this blog contributors have been giving real life examples of how the Australian economy has drifted into recession, yet the elected seem shocked when the after -the- fact FACTS come out. Take the RBA…they are gobsmacked that companies are reducing capex despite the RBA driving interest rates down, and just can not understand why these prudent people aren’t racing down to the bank to throw their companies into even more debt.

    They are freaking clueless.

  10. Rabz

    If it really around 20%, it is as bad as it was in the middle of the Great Depression.

    Yes, but unlike the Great Depression, there now exists a ‘safety net’. I’d also argue that there are quite a few people in the States who, courtesy of the aforementioned safety net, find their level of poverty quite acceptable, thanks.

  11. @SeditionaryI

    The problem with economies that rely heavily or have heavy government spending as economic activity is that it can mask the underlying reality of how the private economy is doing.

    Our government can say “the economy is growing” all it likes, but if the reality is it is only growing because the government is borrowing the money to pump into the economy it can’t change the reality that for everyone else they’re in recession. That has likely been the case for a significant portion of the Australian economy since 2008, government debt/spending has clouded the reality that our economy is broken, and it can’t change the reality that those who aren’t suckling at the teat of government know it is broken and won’t be investing in it anytime soon.

  12. Nato

    “The official unemployment data are notorious for their ability to hide, mislead and distort. ”

    Data doesn’t hide anything. But it is sometimes hidden, this time in the statistics. Kudos to whoever revealed it (link not working).

  13. Old School Conservative

    We too have a group who could work and are not, but aren’t calculated in the unemployment statistics – those not actively seeking work, aka discouraged job seekers. Could be a few of those around!

  14. Pedro the Ignorant

    There is something like 47 million Americans in receipt of food stamp welfare in the United States.

    This figure would suggest that the quoted unemployment rate of 5.4% is a complete and utter fabrication.

    Charts here: http://www.trivisonno.com/food-stamps-charts

  15. hzhousewife

    They are freaking clueless.

    They know, but don’t want to say out loud, or it might scare the horses.

    They are just clueless about how to fix things.

    If it really around 20%, it is as bad as it was in the middle of the Great Depression.

    Yes, but unlike the Great Depression, there now exists a ‘safety net’. I’d also argue that there are quite a few people in the States who, courtesy of the aforementioned safety net, find their level of poverty quite acceptable, thanks.

    Same here in Oz, there are heaps of people who cannot actually afford to get a job because
    it would cost them more to go to work than to stay where they are, home with Mum and Dad ,
    or in the country.

    Our economy is not broken, it is changing fundamentally and the best thing the gov can do is
    stay out of the way while it morphs. Fat chance though, they can’t help but tweak and tweak and tweak.

  16. Deep Green

    Professor Bernanke (best economist in recorded history) says that Australia and most of the world needs to ramp up Govt spending and reduce interest rates to stimulate growth. Are you all such dimwits and dullards that you can’t see that he’s right?

  17. Ant

    It’s all by design.

    The Obama administration is such an abomination that one can scarcely begin to count in how many ways.

    What makes it even more diabolical, though, is two things:

    The complicit media class who actively facilitate it all by concealing the truth and focusing instead on the most unfathomably stupid and irrelevant things, and, secondly the monumentally useless Republican Party which now comfortably controls Congress yet greases the skids to ensure the passage of every significant thing that Obama desires, while pretending that they’re standing up for their country.

    I really can’t see how they can emerge from this. They might get lucky and vote in a President Ted Cruz next year, but it won’t be enough and you can guarantee that his Republicans ‘colleagues’ in Congress will go red hot stifling anything meaningful he tries to do via appropriate channels.

    I recall during the Reagan administration seeing the news reporters down at the inner urban soup kitchens endlessly filming the queues of homeless people waiting for their nourishment and trying to make some sort of connection with that and “trickle down Reaganomics” (actually a term first used by GHW Bush during his primary against Reagan).

    Yet, where are these same frauds today when the poverty problem in the US has reached astronomical proportions?

    They’re such first rate a-holes.

  18. Mk50 of Brisbane, Henchman to the VRWC

    Seriously, anyone with half a brain (which automatically excludes every member of the totalitarian racists known as the Bobby the brown-Hatter’s erm, Tubby ‘The Subhuman Jowl’ Milne, nope, some Completely Boring fascist Natale’s greenfilth, of course, and I guess I DO repeat myself…

    Anyhoo, anyone but those bloody-handed greenfilth racist killers has known this for years. This is our version not of the Great Depression of the 1930s, but of the Great Depression of the 1890s.

    remember, the 1930s Depression occurred in a dirigiste world broken into currency blocs, that of the 90s in a globalised world.

    Which explains the differences.

    (Except to greenfilthers and other assorted extreme left-wing vermin, of course)

  19. sdfc

    Professor Bernanke (best economist in recorded history) says that Australia and most of the world needs to ramp up Govt spending and reduce interest rates to stimulate growth.,

    And why is slower income growth your preferred option?

  20. Andrew

    I am over the moon that Shadow Stats and U6 are being mentioned here.

    It would be great if a similar figure was produced here, with more certainty than the otherwise excellent Morgan Poll figure.

    What have they got that the ABS data doesn’t?

  21. Fidel

    Sarc tags forgotten Deep Green?

  22. incoherent rambler

    It is not all welfare. Selling, smuggling prohibited (or tax free) substances is an easier path than getting a job (for many people). Expect the same side effects as the Great Depression.

  23. Mk50 of Brisbane, Henchman to the VRWC

    IR:

    Expect the same side effects as the Great Depression.

    And the same endgame as we saw 1904-19, and 1931-45.

    It will not be pretty.

    A thoughtful take on where we are heading has been written by the excellent Richard Fernandez. See here (there’s a part II)

  24. sdfc

    How, apart from war, was 1904-19 equivalent to 1931-45?

  25. incoherent rambler

    And the same endgame as we saw 1904-19, and 1931-45.

    Methinks we are at the 1934 stage. Advancement to the 1942 stage is inevitable.

  26. Austin Mangosteen

    incoherent rambler
    #1695949, posted on May 29, 2015 at 9:18 pm
    It is not all welfare. Maybe…

    While the other possibilities are nonetheless true, qualifying for disability benefits in Puerto Rico based on an inability to speak English could also flow over onto the mainland. Puerto Rico is part of the USA. Now with all those recently arriving immigrants who are asylum seekers and all those family members of other settled migrants, not to mention some enterprising lawyers, some minds tend to go numb at the thought, while others count greenbacks.

    The following is from the link below:

    As a result, under the grid rules, a claimant who cannot communicate
    in English may be found disabled when an English-speaking claimant with a similar functional
    capacity, age, education, and past work experience would be found not disabled.

    http://oig.ssa.gov/sites/default/files/audit/full/pdf/A-12-13-13062.pdf

  27. classical_hero

    Here is the link that was meant to be in the OP.

  28. Robert Crew

    I usually ignore comments and posts suggesting that unemployment is under-reported – usually the author has never heard of, or has only just discovered, the different types of unemployment and underemployment – but this caught my eye:

    “In 1994, the BLS stopped including long-term discouraged workers, who have been unemployed for more than a year, in its [U6] statistics”.

    While I agree that people not looking for work are not “unemployed” (my elderly grandmother, for example), if the economic goal is full employment, maybe we should just ignore the rates of unemployment and underemployment, and only report the participation rate.

    I am over the moon that Shadow Stats and U6 are being mentioned here.

    Dot, the ABS releases the underemployment and participation rate stats at the same time, in the same release as the unemployment rate. Is there any reason to believe the ABS has made a similar change (to the quoted BLS change in 1994)?

  29. Makka

    “In 1994, the BLS stopped including long-term discouraged workers, who have been unemployed for more than a year, in its [U6] statistics”.

    There is some history to this and other statistical voodoo during Clinton’s period. Well worth exploring. You will see the same fingerprints as those who helped to kick off the GFC.

  30. .

    Robert the ABS data you mention still doesn’t capture all of the necessary data/phenomena.

    For a number of years now, breaking down the population/employment data shows that the military for example is too large.

    They don’t/can’t record discouraged workers. The data series on this is too sparse. If you “don’t actively look for work” you’re not unemployed. So they discount you if you’re clever enough to realise no one is handing out jobs, only redundancies.

    Anyway:

    http://www.abs.gov.au/ausstats/[email protected]/Previousproducts/1301.0Feature%20Article162005?opendocument&tabname=Summary&prodno=1301.0&issue=2005&num=&view=

    “Main changes in content”

    “The LFS remained essentially unchanged until April 1986, when the underlying employment definition was changed to align with changes to international standards made in 1982 by the International Labour Organisation (ILO). The definition of employed persons was changed to include persons who worked without pay between 1 and 14 hours in the survey reference week, in a family business or on a farm (i.e. contributing family workers). Prior to this change, these unpaid workers were counted as employed only if they worked at least 15 hours in the reference week.”

    So we’ve been using compromised data since then.

    I don’t trust the government data at all. I saw the last CPI rebasing and it was pure propaganda. Magically the inflation rate had fell! Note that it was based off spending surveys conducted during the fallout fo the GFC. Now does that make sense to you?

    The US dropped U6 officially and has recently changed their definition again.

    Don’t be fooled.

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