U.S. Unemployment Rises to 18.5% in July

On August 7th, the Labor Department released what may be the most blatantly fudged piece of economic data ever, the July unemployment report.  In spite of the fact that the economy shed 690,000 jobs in June and July, while the labor force grew by 243,000 – thus, a shortfall of 933,000 jobs – the Labor Department would have us believe that unemployment remained unchanged at the May level of 9.4%.  Their explanation?  That many people dropped out of the labor force.  In the midst of the worst recession since the Great Depression, they would have us believe that that many people have decided that they don’t really need an income. 

I was tempted to title this post “933,000 Americans Audition as Guitarists for MTV,” since the only possible explanation could be that that many Americans came to the same realization made by rock group Dire Straits in their hit song “Money for Nothing”:

Look at them yo-yo’s!  That’s the way you do it!  You play the guitar on the MTV.  That ain’t working.  That’s the way you do it.  Money for nothing and chicks for free!

But there’s nothing funny about this situation.  In a bid to prop up the psychology of the economy, the Obama administration has obviously chosen to employ the same tactics employed by previous administrations in the course of recessions – deceipt and denial.  Since the official unemployment rate is based on “household surveys” instead of hard numbers, it’s impossible for anyone to dispute their results. 

But dispute them I will.  Since the beginning of the recession in December, 2007, the U.S. population has grown by over 4.5 million people.  Yet, in spite of the fact that the labor force is 50.9% of the population, the Labor Department says that the labor force has grown by only 600,000 during that time frame.  In other words, they would have us believe that 3.3 million Americans have found a way to exist without any source of income.

So I’ve developed a new calculation of unemployment that assumes the civilian labor force remains a constant percentage of the population – 50.9% – the November, 2007 level – the level just before the beginning of the recession, when the government was perhaps least motivated to assume that Americans would begin marching off to the MTV studios with their guitars.  Here’s the spreadsheet I’m using for this calculation:

Unemployment Calculation PDF

“U3” is the headline unemployment number reported each month by the government.  But, as you can see, my calculation of this figure – U3a (the “a” meaning adjusted) – is 10.3% instead of the reported figure of 9.4%.  One of my 2009 Predictions (made in November of 2008) was that unemployment would top 10% this year, a figure few economists dreamed we’d reach at the time.  And it only took us six months to get there.  Something in the neighborhood of 11.5% now appears likely. 

However, the more meaningful figure (and less reported) is U6, which includes those who have given up on finding a job or have taken part-time employment when what they really need is a full time job.  In July, the government reported that U6 actually fell below its May level, in spite of the loss of all of these jobs.  So I’ve recalculated U6, using November, 2007 data as a baseline and adjusting it in proportion to changes in U3.  Doing that, I arrive at calculation of U6a of 18.5% instead of the reported value of 16.3%.  Of course, my calculation is dependent upon the government accurately reporting the employment level and the population estimate.  But what else can I do?  I have to rely upon some data.  At least it’s hard data and not something based on a “household survey.”

I’ll continue to report unemployment in future months using these new, more accurate calculations.  If you’re new to this blog, I encourage you to do some looking around the other pages of this blog to get a better understanding of the economic forces that are driving these extreme levels of unemployment.  You’ll find answers based on real economic relationships instead of jury-rigged data used by other “economists” to justify their failed theories.

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One Response to U.S. Unemployment Rises to 18.5% in July

  1. Mark A. Hall says:

    GREAT ANALYSIS PETE!

    However, be on guard. In contradicting “OFFICIAL” government reports, what you cited might be considered sheer blasphemy bordering on insurrection.

    If deported, what country is your 1st choice?

    Personally, I would prefer a more moderate climate like France or Germany.

    Mark

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