. . . it\u2019s a chimera.\u00a0 Or, if you prefer, it’s smoke and mirrors.<\/p>\n
You may have read that the \u201cofficial\u201d unemployment rate “fell” last month to 7.6%.\u00a0 That means the economy is improving and good times are just around the corner, right?<\/p>\n
Um, no – it doesn\u2019t.\u00a0 That\u2019s U3 unemployment, which is probably the single worst measure of employment when it comes to showing the true state of the US economy.<\/p>\n
The U6 unemployment rate \u2013 the unemployment which counts all who want to work full time, but aren\u2019t for whatever reason \u2013 stands at 13.8%.\u00a0 And though U6 is better at showing the true picture of the economy, even that\u2019s misleading.<\/p>\n
Job creation in March 2013 was abysmally<\/em> bad.\u00a0 Only 88,000 net nonfarm jobs were added in March 2013<\/a>.\u00a0 (Job creation totals for Jan and Feb 2013 were revised downward, too \u2013 something that seems to have become a routine thing for quite a while now.)\u00a0 That\u2019s far fewer new jobs than needed to put people back to work.<\/p>\n So, why did “official” unemployment drop?\u00a0 Simple:\u00a0 nearly half a million Americans \u2013 roughly 496,000 \u2013 simply got fed up and quit looking for work<\/a><\/i>.\u00a0 When people quit seeking work, they\u2019re no longer counted when calculating unemployment rates.<\/p>\n Had those same folks kept looking for work, the unemployment rate in March 2013 would have risen<\/em> – to 7.9%.<\/p>\n A far better measure of economic health is the labor participation rate.\u00a0 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.<\/p>\n In that respect, we\u2019re sucking the Big Wazoo.<\/p>\n In March 2013, the US labor participation rate dropped to 63.3%.<\/span>\u00a0 That is the lowest US labor participation rate since May 1979 \u2013 during the Carter Administration<\/i>.<\/p>\n According to the BLS<\/a>, the US civilian labor force in March 2013 was approximately 155,028,000.\u00a0 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.<\/p>\n However, the US labor participation rate in January 2009 was 65.7%<\/a>. \u00a0If 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.\u00a0 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<\/i> 7.6%.<\/p>\n