Unfortunately, the American people are lied to so often by both the corporate world and the government world, that they can't recognize the truth as it stares them in the face... in their own neighborhood or in the grocery store, or in those other places where they encounter real people as opposed to the celebrity who is featured in the media.
Their neighbors share stories of the family member who graduated from school but lives at home because they can't get a job that pays enough for them to move out. Family members share stories of people whose hours of work have been cut to a level where the income no longer feeds the family and no longer provides the previous benefits of, for example, healthcare or retirement. Friends tell of their friends who would have retired after a long career on the job only to find out that that retirement benefit that they had been saving for so long is now gone (often through unethical and/or illegal corporate maneuvers).
These incidents, as shared by people we know are not held as the 'truth' because the lies fed to us by the official world (government & corporate) are so pervasive as to appear truthful. We then conclude that those truths we know through personal experience are 'exceptions' and we fall for the created mythology that if such & such had worked harder or if such & such had planned better...
Deep down we know it isn't true, but we are overwhelmed by the constant stream of contrary evidence presented by government and corporations that we are led to false conclusions.
The rate of employment is only one example of this phenomenon. Even Fortune magazine credits Donal Trump with telling the truth about unemployment when 'The Donald' claims that the real unemployment rate in this country is 40%. Because Trump is typically not believed by the population in general, this truth will ultimately yield to the standard, official lie concerning unemployment.
Their neighbors share stories of the family member who graduated from school but lives at home because they can't get a job that pays enough for them to move out. Family members share stories of people whose hours of work have been cut to a level where the income no longer feeds the family and no longer provides the previous benefits of, for example, healthcare or retirement. Friends tell of their friends who would have retired after a long career on the job only to find out that that retirement benefit that they had been saving for so long is now gone (often through unethical and/or illegal corporate maneuvers).
These incidents, as shared by people we know are not held as the 'truth' because the lies fed to us by the official world (government & corporate) are so pervasive as to appear truthful. We then conclude that those truths we know through personal experience are 'exceptions' and we fall for the created mythology that if such & such had worked harder or if such & such had planned better...
Deep down we know it isn't true, but we are overwhelmed by the constant stream of contrary evidence presented by government and corporations that we are led to false conclusions.
The rate of employment is only one example of this phenomenon. Even Fortune magazine credits Donal Trump with telling the truth about unemployment when 'The Donald' claims that the real unemployment rate in this country is 40%. Because Trump is typically not believed by the population in general, this truth will ultimately yield to the standard, official lie concerning unemployment.
AND, the class of 2016 isn't doing any better !!!
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It’s been said that it takes a village to raise a child. It could also be said that it takes an expanding labor force and good paying jobs to sustain a growing economy. Since the crisis in 2008, there has been a great deal of banter surrounding the rate of unemployment in America. Many suggest the real rate is actually much higher than the rate reported each month. In this article, we’ll break it down into bite-size, easily digestible morsels, and reveal the true story on the real unemployment rate.
Unemployment: An Incomplete Picture? The unemployment rate is an indication of the strength of the labor market. Many believe the employment situation exhibits more influence on the U.S. stock market than any other single metric. In short, it reflects the condition of the American worker who is the backbone of this great nation. When there are plenty of good-paying jobs and when fewer people are out of work, the economic picture is bright. Conversely, when jobs are scarce or when the jobs available are low-paying, menial positions, the opposite is true. The unemployment rate measures the percentage of people who are out of work. However, to be counted as unemployed, you must meet the following three conditions: 1) You do not have a job; 2) You have actively looked for a job in the past four weeks; and 3) You are currently available for work. Numbers one and three are self explanatory. Number two is really the key. According to the standard unemployment measure, if you did not look for a job within the past four weeks (assuming you meet the other criteria), you are not considered unemployed. This is the criteria for the “official” unemployment rate published each month, which is also known as U-3. Since there’s a U-3, it stands to reason that there must be other “Us.” In fact, there are six (U-1 through U-6). We’ll dispense with the entire discussion and focus on the most comprehensive measure of unemployment which is U-6. U-6: The Real Unemployment Rate U-6 is the most comprehensive measure of unemployment. It encompasses U-1 through U-5 (again, U-3 is the official measure) and is defined as follows: U-6 is the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons (PTER), as a percent of the civilian labor force. NOTE: We’ll look at a simple calculation of the unemployment rate in a moment. What’s a marginally attached worker? What’s part time for economic reasons? First, a marginally attached worker is one who didn’t look for a job during the prior four weeks, but did look for a job within the past 12 months. In short, these are people who want to work, are available to work, but are discouraged. In the official unemployment rate (U-3), they are excluded. Second, a person working part time for economic reasons is one who is working less than 35 hours a week but wants to work full time. They may have had their hours cut from full time to part time status. They may even be working as little as one hour a week. In other words, these are workers who are working part time for economic reasons (i.e. they need the money). These are the key differences between the “official” unemployment rate (U-3) and the more comprehensive measure (U-6). Are U-3 and U-6 Much Different? The unemployment rate as measured by U-3 is much lower than the more comprehensive U-6. The following chart contains the unemployment rate for both U-3 and U-6 from January 1994 to January 2015. As you can see, U-6 is much higher. This is because U-6 is counting everyone who is out of work, not just those who looked for a job during the four week period prior to the official unemployment release. There is another issue which affects both measures. Let’s look at it now.  |
The Big Lie: 5.6% Unemployment
by Jim Clifton from Gallup Here's something that many Americans -- including some of the smartest and most educated among us -- don't know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading. Right now, we're hearing much celebrating from the media, the White House and Wall Street about how unemployment is "down" to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market. None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you've stopped looking over the past four weeks -- the Department of Labor doesn't count you as unemployed. That's right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news -- currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren't throwing parties to toast "falling" unemployment. There's another reason why the official rate is misleading. Say you're an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 -- maybe someone pays you to mow their lawn -- you're not officially counted as unemployed in the much-reported 5.6%. Few Americans know this. Yet another figure of importance that doesn't get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find -- in other words, you are severely underemployed -- the government doesn't count you in the 5.6%. Few Americans know this. There's no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie. And it's a lie that has consequences, because the great American dream is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory. A good job is an individual's primary identity, their very self-worth, their dignity -- it establishes the relationship they have with their friends, community and country. When we fail to deliver a good job that fits a citizen's talents, training and experience, we are failing the great American dream. Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America's middle class. I hear all the time that "unemployment is greatly reduced, but the people aren't feeling it." When the media, talking heads, the White House and Wall Street start reporting the truth -- the percent of Americans in good jobs; jobs that are full time and real -- then we will quit wondering why Americans aren't "feeling" something that doesn't remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class. Jim Clifton is Chairman and CEO at Gallup.  |
The Shrinking Labor Force
As mentioned, to calculate the unemployment rate, we need to know two things: How many individuals are employed and the total number who are seeking employment. The total of both comprises the Labor Force Participation Rate. To explain how to calculate the unemployment rate, let’s consider a simple example. Let’s assume we have a town with a total “potential” workforce of 100 individuals. If 10 of the 100 were out of work, the unemployment rate would be 10% (10 / 100 = 10%). However, if 5 of the 10 became discouraged and didn’t look for a job in the previous four weeks, the total labor force would be reduced to 95. This would cause unemployment to fall to 5.26%. In reality, the unemployment situation would not be any better than it was. To better understand this, here’s how the unemployment rate is calculated.
(Total Unemployed / Total Labor Force) x 100
In our example, it would look like this:
(5/95) x 100 = 5.26%
The following chart shows how the U.S. Labor Force Participation Rate has declined since peaking in March 2000. In fact, the current rate is the lowest it’s been since March 1978. Simply put, this means there are fewer people looking for work these days. If the Labor Force Participation Rate was the same today as it was in March 2000, the “official” unemployment rate (U-3) would be closer to 9.0% than the 5.7% reported for January. This would also cause the more comprehensive U-6 rate to rise.
As mentioned, to calculate the unemployment rate, we need to know two things: How many individuals are employed and the total number who are seeking employment. The total of both comprises the Labor Force Participation Rate. To explain how to calculate the unemployment rate, let’s consider a simple example. Let’s assume we have a town with a total “potential” workforce of 100 individuals. If 10 of the 100 were out of work, the unemployment rate would be 10% (10 / 100 = 10%). However, if 5 of the 10 became discouraged and didn’t look for a job in the previous four weeks, the total labor force would be reduced to 95. This would cause unemployment to fall to 5.26%. In reality, the unemployment situation would not be any better than it was. To better understand this, here’s how the unemployment rate is calculated.
(Total Unemployed / Total Labor Force) x 100
In our example, it would look like this:
(5/95) x 100 = 5.26%
The following chart shows how the U.S. Labor Force Participation Rate has declined since peaking in March 2000. In fact, the current rate is the lowest it’s been since March 1978. Simply put, this means there are fewer people looking for work these days. If the Labor Force Participation Rate was the same today as it was in March 2000, the “official” unemployment rate (U-3) would be closer to 9.0% than the 5.7% reported for January. This would also cause the more comprehensive U-6 rate to rise.
Conclusion
In this article, we learned how the unemployment rate is calculated and examined the difference between the official rate (U-3) and the more comprehensive measure (U-6). We also discussed the Labor Force Participation Rate and revealed how it has steadily declined since peaking in March 2000. Before the U.S. can experience strong economic growth – the type of growth we had in the 1980s and 1990s – the U.S. labor force will need to expand. Of course, as technology plays a more prominent role, the need for individual workers will decrease, but that’s a subject for another time. What must happen before the labor force can grow? First, we need a less intrusive government which will allow for a revival of the American entrepreneurial spirit. Second, workers will need to adapt and learn new skills as the country continues to evolve and embrace new technologies. Finally, we need to stimulate consumer demand which is responsible for approximately 70% of total GDP. Actually, this last item is the most important because if consumers don’t knock on the door, pick up the phone, or otherwise increase their level of spending, the first two items will have little effect.
Unfortunately, this issue – like many others – has become more fodder for political demagoguery than substantive discussion. Unless our leaders begin to act like a fiduciary and make decisions which are in the best interest of the country, I suspect very little will change. As I write, I am reminded of J.F.K.’s famous words from his inaugural address in 1961, “Ask not what your country can do for you, ask what you can do for your country.” I am hopeful that we will elect leaders who will disregard personal gain for the good of this great nation. If we do this, American exceptionalism can take root and we will once again become the shining light on the global economic hill. Remember, if it’s good for Americans, it’s good for America.
In this article, we learned how the unemployment rate is calculated and examined the difference between the official rate (U-3) and the more comprehensive measure (U-6). We also discussed the Labor Force Participation Rate and revealed how it has steadily declined since peaking in March 2000. Before the U.S. can experience strong economic growth – the type of growth we had in the 1980s and 1990s – the U.S. labor force will need to expand. Of course, as technology plays a more prominent role, the need for individual workers will decrease, but that’s a subject for another time. What must happen before the labor force can grow? First, we need a less intrusive government which will allow for a revival of the American entrepreneurial spirit. Second, workers will need to adapt and learn new skills as the country continues to evolve and embrace new technologies. Finally, we need to stimulate consumer demand which is responsible for approximately 70% of total GDP. Actually, this last item is the most important because if consumers don’t knock on the door, pick up the phone, or otherwise increase their level of spending, the first two items will have little effect.
Unfortunately, this issue – like many others – has become more fodder for political demagoguery than substantive discussion. Unless our leaders begin to act like a fiduciary and make decisions which are in the best interest of the country, I suspect very little will change. As I write, I am reminded of J.F.K.’s famous words from his inaugural address in 1961, “Ask not what your country can do for you, ask what you can do for your country.” I am hopeful that we will elect leaders who will disregard personal gain for the good of this great nation. If we do this, American exceptionalism can take root and we will once again become the shining light on the global economic hill. Remember, if it’s good for Americans, it’s good for America.
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