Real unemployment rate is 22.9%

http://lewrockwell.com/roberts/roberts379.html

Statistician John Williams (shadowstats.com) calls the government’s latest jobs and unemployment reports “nonsense numbers.”

There are a number of ongoing problems with the released numbers. For example, the concurrent-seasonal factor adjustments are unstable. The birth-death model adds non-existent jobs each month that are then taken out in the annual downward benchmark revisions. Williams calculates that the job overstatement through November averages 45,000 monthly. In other words, employment gains during 2012 have been overstated by about 500,000 jobs. Another problem is that each month’s jobs number is boosted by downside revision of the previous month’s jobs number. Williams reports that the 146,000 new jobs reported for November “was after a significant downside revision to October’s reporting. Net of prior-period revisions, November’s seasonally-adjusted monthly gain was 97,000.”

Even if we believe the government that 146,000 new jobs materialized during November, that is the amount necessary to stay even with population growth and therefore could not be responsible for reducing the unemployment rate from 7.9% to 7.7%. The reduction is due to how the unemployed are counted.

The 7.7% rate is known as the “headline rate.” It is the rate you hear in the news. Its official designation is U.3.



The Bureau of Labor Statistics has another official unemployment rate known as U.6.
The difference is that U.3 does not include discouraged workers who are not currently actively seeking a job. (A discouraged worker is a person who has given up looking for a job because there are no jobs to be found.) The U.6 measure includes workers who have been discouraged for less than one year. The U.6 rate of unemployment is 14.4%, about double the headline rate.

The U.6 rate does not include long-term discouraged workers, those who have been discouraged for more than one year. John Williams estimates this rate and reports the actual rate of unemployment (known as SGS) in November to be 22.9%.



There is more if you dare read.

There is a very large group of people moving onto the '55-65' age group. This age group has a lower participation rate than younger groups. There is also a very large group of people moving into the '20-24' age group that is delaying entering the workforce to attend college. While economic conditions are partly responsible, these demographic shifts are causing a large part of the participation rate decline. That is to say.....you could have predicted it many years ago, before the Great Recession.

I hope everyone enjoyed my prescient comment yesterday...the NY Times covers it in detail today:

When Looking at Job Numbers, Add In a Changing America

http://dealbook.nytimes.com/2012/12/11/when-looking-at-job-numbers-add-in-a-changing-america/

"Decades ago, a rule of thumb was established that the economy needed to add 150,000 jobs a month to accommodate new entrants to the labor force. That number has been repeated often during the recent recovery, reflecting worries that the unemployment rate will remain very high unless the pace of job creation rises significantly."

snip

"Given the changes in the labor force, the break-even rate now is probably around 90,000 per month, and it might be lower."

snip

"One reason for it to decline — and the one that people tend to talk about — is that workers become discouraged and drop out of the labor force. To the extent that is happening, it is a bad sign. Over time, however, the principal reason for a declining rate is something else entirely. It is the aging of the population. The participation rate covers all people aged 16 and over. Obviously, someone who is 16 is more likely to be in school, and someone who is 75 is more likely to be retired, so the mix of the work force is important in evaluating the raw number.

Researchers for the Federal Reserve Bank of Chicago concluded last year that roughly half the decline in the participation rate over the last decade was related to the changing work force, and the rest was caused by the economic slowdown."