Home > Economy, Unemployment > The Real Unemployment Rate: 22% – Not 8.1%

The Real Unemployment Rate: 22% – Not 8.1%

“JIM: Joining me on the program today is John Williams of Shadow Government Statistics.

And John, before we get into a real big issue that’s going to hit the economy January 2013, I want to talk about the front page of your website. And you have two graphs that are available publicly and one is the unemployment rate where you have U3, U6 and then SGS, which is your own. Let’s talk about those numbers, what they mean for our listeners and the differences between them. [1:11]

JOHN: Sure. I’ve been a consulting economist for 30 years. What I’ve found over the decades is that the government’s reporting has moved further and further away from common experience, and really, the average guy has got a pretty good sense of what’s going on. If you feel the economy is not as strong as the government is saying or that inflation might be higher than what they’re reporting, you’re most likely right because you’re dealing with the real world.

The numbers use to deal much closer to real world experience.

And with the unemployment number, if you, let’s say, went around the entire country and asked everyone whether he or she was unemployed, you’d get an immediate answer. Most people have a pretty strong opinion as to what’s up, they have a job; they know what’s going on. But if you put all those numbers together, you’d come up with a much higher unemployment rate than the government reports, or at least the headline government number to date. So that’s all due to definition.

In order to be counted in the headline unemployment rate – and keep in mind, the government actually publishes six levels of unemployment. The third level they call U3 is the headline number – you have to obviously be out of work and willing and able to take a job, but you have to have actively looked for work in the last four weeks. There are people who’ve stopped looking for work after a period of time when there are just no jobs to be had, yet they’d take a job if it were available, and they otherwise consider themselves unemployed. They want a job; they are willing and able to work. And again, they’d take it as soon as it was offered. If you haven’t been looking in the last four weeks, the government will count you as a discouraged worker so long as you’ve looked for work in the last year.

If you haven’t actively looked for work in the last year, they don’t count you at all.

Before 1994, anybody who was a discouraged worker, irrespective of the period of time, was counted as a discouraged worker. So that where you have the U3 unemployment rate at, I believe it’s 8.2% in March, the government’s broadest number U6 (which includes what I call the short term discouraged workers, those who have given up looking for work, but not for more than a year) and also includes people who work part-time for economic reasons (they can’t get a full-time job, they want a full-time job but you know, no full-time job is available) that’s running up somewhat over 14%.

And what I do is I add to that my estimate of the longer term discouraged workers – those who have been discouraged more than a year. That puts you up over 22%.

What happens here is the people who are unemployed roll out of the U3 level; they become discouraged because there are no jobs to be had, and so they go into the U6 level.

And after a year, they roll out of the U6 level in terms of going into another world that the government does not count. I still estimate them, so my number is broader than the government’s number. So when you see the unemployment rate dropping, yet the broader measures are rising or staying at near historic levels, you do not have an economic recovery and that’s what we’re showing. “

Via Lew Rockwell

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Categories: Economy, Unemployment
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