The Real Unemployment Rate is Closer to 11%, or 20% if you Include the Underemployed

Posted by PITHOCRATES - December 18th, 2011

Week in Review

If at first you fail, lie, lie and lie again (see Wonkbook: The real unemployment rate is 11 percent by Ezra Klein posted 12/12/2011 on The Washington Post).

Typically, I try to tie the beginning of Wonkbook to the news. But today, the most important sentence isn’t a report on something that just happened, but a fresh look at something that’s been happening for the last three years. In particular, it’s this sentence by the Financial Times’ Ed Luce, who writes, “According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent…”

Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That’s millions of workers leaving the workforce, and it’s not because they’ve become sick or old or infirm. It’s because they can’t find a job, and so they’ve stopped trying. That’s where Luce’s calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate — the apples-to-apples unemployment rate — is probably 11 percent. And the real un- and underemployed rate — the so-called “U6” — is near 20 percent.

There were some celebrations when the unemployment rate dropped last month. But much of that drop was people leaving the labor force. The surprising truth is that when the labor market really recovers, the unemployment rate will actually rise, albeit only temporarily, as discouraged workers start searching for jobs again.

Mark Twain said that figures don’t lie but liars figure.  And the Obama administration has been lying with the unemployment numbers.  Because their Keynesian economic policies have been an abject failure.  And no president ever won reelection with an unemployment rate above 8%.  So when your true unemployment rate is near 11% you play with the numbers.  And magically report that 11% is only 8%.  Giving you at least a snowball’s chance in hell of reelection.  As long as no one understands the unemployment picture is best described with the U6 number.  Which is currently near 20%.

Figures don’t lie but liars figure.  And it is apparent that the Obama administration must be full of liars.  Because they’ve been figuring the hell out of these unemployment numbers.

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