fake it ’til you make it
The official unemployment rate is 5.5 percent. The real unemployment rate is 13.3 percent. This means 22.8 million Americans are unemployed —not 8.3 million.
It’s no secret that governments fudge numbers, but it’s not always obvious how they do it. The unemployment rate is one of the rare cases where we know exactly how they do it.
The unemployment rate is calculated by a government agency called the Bureau of Labor Statistics (BLS).
The BLS begins by taking America’s total population and subtracting everyone who’s younger than sixteen, who’s in the military, or who’s “institutionalized” (in jail, asylums, or old folks homes). This gives them the non-institutional population—everyone who can potentially work.
This population is then divided into two groups: the civilian labor force, people who have or want jobs, and those not in the labor force, people without jobs who don’t want jobs.
The labor force is then sub-divided into employed and unemployed people. The unemployment rate is simply the percentage of people in the labor force who don’t have jobs, but want one.
Officially there are 8.3 million unemployed people.
But this figure doesn’t tell the whole story. To be officially unemployed, you must be actively looking for work. In other words, if you stop sending out resumes or contacting employment agencies, then you drop out of the labor force and are no longer technically unemployed—even if you stopped looking for work because there was no work.
This distorts the data quite severely. For example, say you live in a small town whose livelihood is tied to the local factory. Now pretend the factory shuts down and half the town loses their jobs. If these people don’t bother looking for work (because there is no work), they are not officially unemployed, they drop out of the labor force. Poof. No unemployment—even though a whole town is on welfare.
These are America’s invisible people. Our economic ghosts.
hiding the body
The next question worth asking is: how many people were falsely dropped from the labor force? Millions.
The BLS releases a number of unemployment figures that the media and political class often ignores. The broadest measure of unemployment is the U6 Unemployment Rate, which includes the 8.3 million people from above, plus 6 million involuntary part-time workers, and 1.7 million “marginally attached” workers (people who send out the occasional resume). This brings the real unemployment rate up to 9.7 percent, or 16 million people—almost double the official rate.
But that’s not all.
The BLS tracks why people drop out of the labor force by conducting comprehensive national surveys. In 2015, 1.7 million people said they dropped out for “other reasons”. When looking at what these “other reasons” were, it turned out that 1.5 million of them said that there was no work. Apparently “other reasons” is code for “no work”—despite the fact that there is a different survey category for that. Adding these people back into the mix brings the running total up to 17.5 million unemployed Americans.
On top of that, millions of Americans claimed they dropped out of the labor force because they went “back to school”. However, when we check labor force dropout rates against actual school or college enrollment numbers we find this probably isn’t entirely true. For example: in 2014, 31 percent more teenagers claimed they couldn’t work because of school than in 2004. However, school enrollment only increased by 1 percent.
The same is true for young adults (age 20-24): in 2014, 28 percent more claimed they couldn’t work because they were going to college than in 2004, but post-secondary enrollment only increased by 8.4 percent.
Unless young people stopped skipping class or drinking, and started studying like never before, it’s reasonable to assume most of them stopped working because there were no jobs. This accounts for another 3.35 million people, which brings the running total up to 20.85 million unemployed people.
The other major category that distorts the picture are disability claims.
In 2014, fully 31.5 percent more people said they couldn’t work because of disabilities, but the number of disabled people only increased by 13.6 percent, according to Social Security.
In effect, the job market is so bad, that 1.96 million people with, sometimes minor, disabilities have been squeezed out of the labor force. Many are now chronically unemployed, while others live off government handouts. That’s bad for them, and that’s bad for the taxpayer.
This brings our final total up to 22.81 million unemployed Americans, which translates into 13.3 percent unemployment.
Also remember that this doesn’t include people who retired early because they couldn’t find work, nor people who are underemployed (think of all those people with college degrees working at Starbucks).
It also doesn’t include estimates regarding illegal immigrants, many of whom are unemployed, yet still draw upon the welfare system—there are potentially millions more that we simply don’t have adequate data for.
The consequences of this unemployment are far-reaching and damaging to America’s economy and psyche. Restoring the American dream of employment should be our highest priority.