PJ Media

What Is the Real Unemployment Rate?


Just beneath the surface, the government’s latest employment report shows how much damage the POR (Pelosi-Obama-Reid) economy, now well into its sixth year, has done to the country’s economic fabric. The impact of Obamacare, if it isn’t stopped, will only compound it.

Even the relatively decent news in Uncle Sam’s October report was suspect.

Employers are said to have added 204,000 seasonally adjusted jobs. But as the Associated Press noted, the government, thanks to the 17 percent government shutdown, had an extra week to retrieve its surveys from employers, and therefore had a higher than usual response rate. It doesn’t seem as if this should matter, but apparently the Bureau of Labor Statistics has a history of estimating high in its initial releases when it has more time to collect and assemble the data. Additionally, economist Mark Zandi believes that “businesses may have inadvertently counted employment for an extra week.”

Even more questionable are the BLS’s revisions to August and September. As seen below, the raw (i.e., not seasonally adjusted) figures show no revised net improvement during those two months. But that goose egg somehow turned into 60,000 additional jobs during seasonal conversion:


Then there’s the unemployment rate. Even though it ticked up to 7.3 percent, that was also supposedly good news, because it would have dropped if it weren’t for the 850,000 federal government workers furloughed during part or all of the partial shutdown and treated as unemployed.

The real problem, thanks to the POR economy’s progenitors and the Obamanomics policies which have accompanied it since January 2009, is that the official unemployment rate is more unreflective of true job market conditions than it has ever been.

During Republican and conservative presidential administrations, those on the left, particularly in organized labor, often complained bitterly that the official unemployment rate fails to count discouraged workers and those who are working part-time for economic reasons. For some reason — I wonder why? — they’re incredibly quiet these days, even though their complaint, as we will see, is far more valid.

In August 1982, AFL-CIO head Lane Kirkland contended that the previous month’s official 9.8 percent unemployment rate, so adjusted, would have been 13.6 percent, or 3.8 points higher. That’s interesting, because October 2013’s seasonally adjusted “U-6” unemployment rate, after I adjusted the official 13.8 percent down by 0.2 points to account for those furloughed government workers, was that very same 13.6 percent, even though the official 7.3 percent “U-3” unemployment rate was 2.5 points lower than it was at the time of Kirkland’s complaint.


Though Big Labor’s beef has always been somewhat valid, the difference between the U-3 and U-6 rates was almost always between three and five percentage points throughout the 1980s, 1990s, and the majority of the most recent decade, meaning that there was no reason to be overly concerned about that difference — until the POR economy came along.

As seen in the above chart, the difference between the U-3 and U-6 rates gradually and consistently fell during the first six years the BLS began formally tracking U-6. It rose during the 2001-2002 recession, fell slightly for a few years after that, and remained stable until the spring of 2008.

Then disaster struck. The difference quickly widened, not at all coincidentally beginning when America figured out that Barack Obama would likely become its next president, i.e., when the POR economy began. After only a year, the U-3 vs. U-6 gap, which had almost never been above 5 points, exploded to over 7 points. After Barack Obama’s nearly five years at the helm, the gap has barely narrowed, and is still miles above any previous era.

But even the U-6 rate understates how bad things are. That’s because of the staggering number of people who have dropped out of the workforce entirely. While many of those involved are retirees, most aren’t.

The civilian labor force dropped by a seasonally adjusted 720,000 in October. The BLS says that the government furloughs did not influence that decline. In the 57 months since Barack Obama took office, the labor force has grown by only 607,000 — an average of less than 11,000 per month. Meanwhile, the adult population has grown by 11.642 million.

If only a very conservative one-third of the 11.035 million additional adults who are now sitting things out (11.642 million minus 607,000) were included in the workforce, the U-3 and U-6 unemployment rates (without adjusting for the furloughs) would be much, much higher:


Based on the above, it is reasonable to assert that almost 16 percent of Americans would like to be working full-time somewhere — and aren’t.

Related to all of this, the overall workforce participation rate has dropped from 65.7 percent to 62.8 percent during Barack Obama’s presidency thus far. That rate dropped by 0.4 points in October alone, to the lowest level seen since 1978.

Add to all of this the fact that millions of workers are, out of necessity, in jobs for which they are overqualified. Half of all college graduates are working jobs which do not require a college degree. Even if you subtract out those who are exactly where they want to be by choice, that’s a staggering figure. The “underemployment rate,” if you will, is surely well above 20 percent. Yet we continue to churn out college grads, pretty much ensuring that this dangerously wasteful trend will continue, even as household incomes continue to stagnate.

Obamacare threatens to turn what is already a very rough situation into a potential cataclysm.

Barack Obama’s “signature achievement” discourages work. Its millions of individual and small employer group policy cancellations will suddenly force millions of Americans to spend hundreds of dollars extra per month most of them don’t have, leading to massive cuts in discretionary spending — or will cause them to go without insurance entirely. A no-growth Obamacare Christmas may well be in the offing.

As long as the Obamacare albatross hangs around, employers will have to play it close to the vest on hiring. The uncertainties about what this authoritarian administration may or may not do are too daunting — and we don’t even know whether the Mother of All Website Failures will ever function properly.

The only real solution is the one certain courageous conservatives pushed in September before they were overcome by the wing of the Republican Party which, carrying on in the sellout tradition of Bob “Tax Collector for the Welfare State” Dole, is on track to become the welfare state’s health insurance premium collectors.

At this point, defunding Obamacare and repealing it entirely is an absolute necessity. Once that occurs, we might finally be able to talk about how to embark on a meaningful economic revival and how to make the all-inclusive unemployment rate come down.