Think of an imaginary country named Utopia with a population of 100 in which 65 already have a job or are looking for a job. The other 35 consists of children, retirees or women choosing to stay home and raise children. If 59 of the 65 already have a job and 6 people don’t have a job but are looking for one, the size of the labor force in Utopia is 65 souls [Utopian government officials and their Utopian economists call this the “labor participation rate”]. So, we now see that the unemployment rate in Utopia is 6 divided by 65 or 9.2%. Now imagine that Zork, 1 of the 6 Utopians looking for work, gets discouraged and gives up. Imagine also that the Utopian Bureau of Labor Statistics (BLS) does not count as unemployed anyone who gives up looking for work. Thus, Zork is no longer a part of the labor force. The labor force has been reduced from 65 to 64 with 5 people unemployed and looking for work. Now the unemployment rate is 5 divided by 64 or 7.8%. By the simple expedient of not counting Zork in the labor force, Utopia’s BLS has reduced the unemployment rate from 9.2% to 7.8%. No new jobs have been created, none of the unemployed have found work, but a dramatic drop in the unemployment rate has magically occurred in the magic Kingdom of Utopia. Zork has suggested that the Utopian Bureau of Labor Statistics shorten its initials from BLS to just BS.
Imagine also that Utopia is a country that reelects its president every 4 years, and in the past no sitting president has ever been reelected with a Utopian unemployment rate above 8%.
With the next election on the horizon Utopians have reduced their unemployment rate below the critical 8% level and Utopia’s boy president, nicknamed Ocrama for the manner in which crammed a Utopian health care law down the throats of Utopians during his first term as president, seems to be on a glide path to reelection.
If you keep this fable in mind it might be easier to follow the rest of this post.
Why the official 8.3 percent unemployment rate is a phony number. But does anyone believe an “official” unemployment rate of 8.3 percent really gives an accurate picture of the U.S. labor market? Even though the unemployment rate fell, so did the labor force participation rate (as more Americans became discouraged and gave up looking for work). Here’s what that means:
1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7 percent then vs. 63.7 percent today—the U-3 unemployment rate would be 11.0 percent.
2. But let’s not go all the way back to January 2009. In January 2011, the unemployment rate was 9.1 percent with a participation rate of 64.2 percent. If that were the participation rate today, the unemployment rate would be 8.9 percent, instead of 8.3 percent. As an analysis from Hamilton Place Strategies concludes, “Most of the shift of the past year is due not to the improvement in the labor market, but the continued drop in participation in the labor force.”
3. Now, to be fair, some of the decline in the participation rate is aging Baby Boomers dropping out of the labor force. But taking that into account still doesn’t get us very far, as HPS notes:
Demographic projections expect that participation rate to be at 65.3 percent. If that full participation rate is the goal, our economy is “missing” 3.8 million workers, up from the 3.4 million we noted in the white paper. The unemployment rate in that context has not budged at 10.4 percent.
4. Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate is still a sky-high 15.1 percent.
From the Economic Collapse Blog:
I Can’t Take It Anymore! When Will The Government Quit Putting Out Fraudulent Employment Statistics?
So does this mean that our economic problems are over? Of course not. A closer look at the numbers reveals just how fraudulent these employment statistics really are. Between December 2011 and January 2012, the number of Americans “not in the labor force” increased by a whopping 1.2 million. [i.e., the size of the labor force went down — TeeJaw] That was the largest increase [i.e., decrease — TeeJaw] ever in that category for a single month. That is how the federal government is getting the unemployment rate to go down. The government is simply pretending that huge numbers of unemployed Americans don’t want to be part of the labor force anymore. As you will see below, the employment situation in America is not improving. Yet everyone in the mainstream media is dancing around as if the economic crisis has been cancelled. I can’t take it anymore! It is beyond ridiculous that so many intelligent people continue to buy in to such fraudulent numbers.
Was Today’s Jobs News Good?
…how good was today’s news, really? What is mainly going on is that fewer Americans have any intention of working; therefore, they cannot be unemployed. That is the Orwellian logic that underlies “good news” in the Age of Obama. The key fact is that labor force participation has reached a 30-year low of only 63.7%. More and more Americans are giving up on gainful work and resigning themselves to lives of dependence on government. Barack Obama thinks that is a good thing. Do you?
Read more at the links to the the above excerpts.