. . . it’s a chimera. Or, if you prefer, it’s smoke and mirrors.
You may have read that the “official” unemployment rate “fell” last month to 7.6%. That means the economy is improving and good times are just around the corner, right?
Um, no – it doesn’t. That’s U3 unemployment, which is probably the single worst measure of employment when it comes to showing the true state of the US economy.
The U6 unemployment rate – the unemployment which counts all who want to work full time, but aren’t for whatever reason – stands at 13.8%. And though U6 is better at showing the true picture of the economy, even that’s misleading.
Job creation in March 2013 was abysmally bad. Only 88,000 net nonfarm jobs were added in March 2013. (Job creation totals for Jan and Feb 2013 were revised downward, too – something that seems to have become a routine thing for quite a while now.) That’s far fewer new jobs than needed to put people back to work.
So, why did “official” unemployment drop? Simple: nearly half a million Americans – roughly 496,000 – simply got fed up and quit looking for work. When people quit seeking work, they’re no longer counted when calculating unemployment rates.
Had those same folks kept looking for work, the unemployment rate in March 2013 would have risen – to 7.9%.
A far better measure of economic health is the labor participation rate. This is simply the fraction of the US civilian non-institutionalized population (essentially those between 16 and 64 and not in the military or institutionalized) that is either seeking work or actually working.
In that respect, we’re sucking the Big Wazoo.
In March 2013, the US labor participation rate dropped to 63.3%. That is the lowest US labor participation rate since May 1979 – during the Carter Administration.
According to the BLS, the US civilian labor force in March 2013 was approximately 155,028,000. That represents 63.3% of the US civilian non-institutional population. Of those, approximately 143,286,000 were employed; the remainder were actively seeking employment.
However, the US labor participation rate in January 2009 was 65.7%. If the same fraction of the population were participating in the labor force today, the US civilian labor force would be (0.657) * (155,028,000 / 0.633) = about 160,961,700. Since only 143,286,000 are currently employed, if we had the same labor participation rate today as we did in January 2009 the “official” (U3) unemployment rate would today be 10.98% – not 7.6%.
Unemployment in January 2009 was 7.8% with a labor participation rate of 65.7%. Doing the math indicates we’d need employment today of roughly 148,406,700 to equal those conditions.
What that means is that we’re more than 5 million jobs short of what we need just to get back to where we were at the end of January 2009 – 5.12 million jobs short, to be precise. But don’t worry; the current Administration has things “under control” and “moving in the right direction”.
Yeah, right. Since January 2009, we’ve seen a fairly steady decline in the US labor participation rate of about 0.048% per month – for 50 months, resulting in a net decline of 2.4%. And the trendline for that decline doesn’t seem to be leveling off, either.
I always wondered what would have happened had we reelected Jimmy the Clueless in 1980. Economically, it looks like we might just be about to find out.