May 01, 2013

Unemployment Crisis: Unearthing the Facts Behind Official Claims

The BLS divides unemployment into six categories, U1 to U6, that measure different aspects of unemployment. The official unemployment rate is U3.

unemployement crisis

Some of these segments should have been included in the unemployment calculation, but it will make the unemployment rate increase. This is an interesting concept and puts a large question mark on the population segment who have either not worked in a long time or have struggled to find jobs and have given up.  It also provokes questions on the unemployment calculation method.  

BLS Definition of Unemployment: Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.

The official unemployment rate in February 2013 is 7.7% (down from 7.9% in January 2013), which is commonly attributed to a positive jobs report. Rex Nutting of Market Watch refutes this, saying that the unemployment rate fell due to 130,000 unemployed people who were unable to find jobs and became discouraged, thus dropping out of the U3 measure of unemployment.  The U6 measure, which includes some discouraged workers, shows an unemployment rate of 14.3%. However, statistician John William created a measure that includes all discouraged workers (people who have completely ceased looking for a job) which shows an unemployment rate at 23%. Following this logic, the real rate of unemployment is 2-3 times the official reported rate.

The BLS reports that 236,000 new jobs were added in February. Dr. Paul Craig Roberts of Global Research questions the creation of these jobs. The 23,700 new jobs in retail trade are questionable due to the absence of consumer income growth. The 20,800 jobs in motion pictures and sound recording industries are problematic since this is a category that historically has not had substantial change in employment. However, the 48,000 jobs in construction are credible due to the recent boost in the housing market; the 10,900 jobs in accounting and bookkeeping are also legitimate as tax preparation is seasonal, with income tax annual filing deadline of April 15th.

A Comparison of Unemployment Rates

A Comparison of Unemployment Rates