As reported in the above-linked Reuters article, the Bureau of Labor Statistics (BLS) reported this morning that the economy lost 85,000 jobs in December and unemployment held steady at 10.0%. But a closer look at the data reveals a much worse picture.
The “jobs lost” data is based on the BLS’s “non-farm payrolls” report, which shows non-farm payrolls declining by 85,000 in December to 130,910,000. But the unemployment figure is based upon a broader measurement of employment level that includes the agriculture sector. By that measure, total employment fell by 589,000 in December to 137,792,000. So why didn’t unemployment rise? Because the other component of that calculation – the “civilian labor force” – contracted once again by 661,000 in spite of the fact that the population grew in December by 200,000. The government has been using this phenomenon of a magically vanishing labor force to hold down the unemployment rate since the onset of the recession in late 2008.
If we assume the labor force is a constant percentage of the population, then the real unemployment rate rose by 0.4% in December to 12.0%, the highest level since the Great Depression. And the broader measure of unemployment, which includes those who have given up looking for work and those working part-time when they really need full-time work, rose to 21.3%.
The following is my calculation of unemployment, using the government’s own data:
(By the way, if you compare this spread sheet to the one included in my post on the same subject last month, you’ll see that some of the data has changed slightly. That’s because the BLS revised the data for small changes in population estimates.)
The following is a chart of the same data, just to make it easier to visualize what’s happening:
Notice that the government’s methods for calculating unemployment (both U3 and U6) correlated very closely with my own method until the start of the recession, when the labor force began disappearing.
Finally, some observations about the December data:
- The employment level is virtually unchanged from the level in December of 2000.
- During that same time frame, the population has grown by 25 million.
- In the last 12 months, the employment level has fallen in ten of those months and has risen twice (most recently in November), for a total loss of 5.2 million jobs. Of those ten months in which losses occurred, the loss in December was the 3rd worst.
- In the last 24 months, the employment level has fallen in 19 of those months, for a total loss of 8.2 million jobs.
- As you can see from my chart of U3a unemployment, contrary to economists who are hailing the slowing rate of job losses, unemployment continues to rise unabated.
Since the Obama administration continues to sit on its hands when it comes to restoring a balance of trade, none of this is a surprise. It’s likely to get worse. Stay tuned.