NEW YORK – While President Obama plans in his upcoming State of the Union address to tout 5.6 percent unemployment in December as another sign of a “recovery” generated by his economic policies, a record 92.9 million Americans are no longer in the labor force, as the labor participation rate hit a new 38-year low last month, at 62.7 percent.
Adjusting the BLS unemployment number to report what is known as “U-6” – a measure that includes total unemployed plus all persons marginally attached to the labor force plus total part-time employed for economic reasons – unemployment in April was 11.2 percent.
Economist John Williams, editor of ShadowStats.com, a website known for arguing the government reports are manipulated for political purposes, has calculated that the “real unemployment rate” – taking into consideration those who have dropped out of the labor force because of lack of work – has remained above 23 percent since April 2013.
‘Meaningless economic statistics’
Williams has repeatedly argued the unemployment rate as reported by the BLS has become virtually meaningless.
In his current subscription newsletter, Williams warned: “Given continuing indications of weakening broad economic activity in fourth-quarter 2014, combined with the heavy, regular and irregular distortions in the headline reporting of monthly nonfarm payroll gains, almost anything remains possible with the headline December reporting.”
Williams recreates a ShadowStats Alternative unemployment rate reflecting methodology that includes “long-term discouraged workers” that the Bureau of Labor Statistics in 1994 under the Clinton administration removed from those considered “unemployed” in any of the government’s unemployment measures.
Using his alternatively calculated unemployment rate, Williams has reported the real unemployment rate since April 2013 has remained at approximately 23 percent.
The White House claimed in a press release Friday that a “solid employment report caps off a strong year for the U.S. labor market, which achieved a number of important milestones in 2014.”
“Total job growth last year was the strongest since 1999, while the unemployment rate fell at the fastest pace in three decades.”
The White House said the private sector “has added 11.2 million jobs over 58 straight months of job growth, extending the longest streak on record.”
“Today we learned that total nonfarm payroll employment rose by 252,000 in December, mainly reflecting a 240,000 increase in private employment. Private employment has risen by at least 200,000 for 11 consecutive months, the first time that has happened since the 1990s.”
Prior to the release of the December unemployment report, Williams warned that the Obama administration claiming gains in payroll employment is due not to an increase in full-time jobs but typically reflects individuals taking on multiple part-time jobs.
On Wednesday, WND reported Obama boasted of his rescue of the auto industry, speaking at a Ford assembly plant in Wayne, Michigan, that was closed temporarily because of lack of demand for the small cars and hybrids the plant produces. The speech was regarded as a warm-up for the “economic recovery” themes the administration plans to feature in the president’s upcoming State of the Union speech.
Manipulated unemployment rates
The BLS publishes six levels of unemployment, but only the U3 unemployment rate gets the press. The headline number does not count as unemployed the “discouraged” jobless who have not looked for work in the past four weeks because they believed no jobs were available.
Williams has demonstrated that it takes an expert to truly decipher BLS unemployment statistics.
The U-6 unemployment rate is the BLS’ broadest measure. It includes those marginally attached to the labor force and the “under-employed,” who have accepted part-time jobs when they are really looking for full-time employment. Also included are the short-term discouraged workers.
Since 1994, however, the long-term discouraged workers, those who have been discouraged for more than one year, have been excluded from all government data.
The only measure BLS reports to the public, as the official monthly unemployment rate, is the headline, seasonally adjusted U3 number.
Williams calculates his “ShadowStats Alternative Unemployment Rate” by adding to the BLS U-6 numbers the long-term discouraged workers, i.e., those workers who have not looked for work in more than a year, but still consider themselves to be unemployed.
Williams argues that his ShadowStats Alternative Unemployment measure most closely mirrors common experience.
“If you were to survey everyone in the country as to whether they were employed or unemployed, without qualification as to when they last looked for a job, the resulting unemployment rate would be close to the ShadowStats estimate,” Williams explained to WND.
The headline BLS unemployment rate has stayed relatively low because it excludes all discouraged workers, Williams argues.
As the unemployed first become discouraged and then disappear into the long-term discouraged category, they also vanish from inclusion in the headline labor-force numbers. Those workers still are there, however, ready to take a job if one becomes available. They are unemployed and consider themselves to be unemployed, but the government’s popularly followed unemployment reporting ignores them completely.
Here is a more complete unemployment table that includes the seasonally adjusted unemployment percentages for U3 unemployment, as well as the same for U6 unemployment, followed by the ShadowStats Alternative Unemployment rate:
Increasingly, critics like Williams believe the seasonally adjusted U3 numbers reported by the BLS as the official monthly unemployment rate do not give a reliable picture of the true magnitude of unemployment in the United States.
“Underlying economic reality and the fundamental drivers of economic activity would suggest a general upturn in U3 in June, but the BLS’s continuing purge of discouraged workers from the unemployment rolls and headline labor force would argue in favor of a lower rate,” Williams wrote in his subscription newsletter June 25.
The BLS definitions conveniently exclude from the definition of unemployed those who have grown so discouraged that they are not actively looking for work in the past year, without distinguishing those who would look for work if there were a reasonable chance their job search might result in employment.