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Real Unemployment at 23% - Dampening the Excitement

September 9th, 2012

By Michael Collins
There was a shadow over the national conventions of both political parties. The people know that the economy is much worse than anyone in the power structure will admit. As usual, the people are right. The real rate of unemployment is 23%, not the official figures we hear on a regular basis. The 23% figure represents all of those unemployed no matter how long, the involuntarily under employed (part time), and those who have given up looking, the discouraged, due to an chronically arid job market. If either wing of The Money Party, Democratic or Republican, admits to the the real unemployment situation, they would be forced to admit a complete system failure and compelled to act now. There would be no choice but to drop the nonsense about austerity and balanced budgets.

Here is how the fantasy of the official unemployment figure works.

Official unemployment includes those who are both unemployed during the week of the Bureau of Labor Statistics (BLS) survey and without a job for the prior four weeks.

The official unemployment number we see excludes those marginally attached to the labor force, discouraged workers, and those working part time due to the absence of full time work. The Alternative unemployment statistic is always higher than the official version. It includes most of the unemployed but excludes discouraged workers after twelve months without a job (See Appendix). In the chart above, you will see the official government unemployment number (U-3), the alternative number (U-6), and the shadowstats.com figure, which includes U-3 and U-6 plus all those unemployed who have given up. That represents 23% of the work force. (Graph Courtesy of Shadowstats.Com Shadow Government Statistics - John Williams)

How can citizens make responsible decisions when the official unemployment rate, 8.1%, is just 35% of the real unemployment rate, 23%?

Who benefits?

Another Useful Fiction - the Consumer Price Index

The Consumer Price Index (CPI) is used to measure the annual rate of inflation. The measure is vital to effective understanding of the real state of the economy at any point and over time. It is also the measure used for a variety of important programs like Social Security and other retirement programs.

There were major changes in the methodology for determining CPI prior to 1980 and again in 1990. The net result is a much lower CPI and a much lower reported rate of inflation. Combining the real CPI, based on the more robust and realistic 1980 CPI with flat wages over the years explains why so may feel like they're treading water and struggling against increased prices. It explains why so many wonder what's going on given the reports that we've conquered inflation. (Graph Courtesy of Shadowstats.Com Shadow Government Statistics - John Williams)

It's easy to conquer inflation, unemployment, etc. when you control of the rules that define the outcome. Just change a few assumptions, and, as if by magic, inflation is no longer a problem.

The recent scandal in setting the Libor interest rate exposed bankers colluding to take more from customers by lying about basic data that created this rate central to loan rates. How is that any different than what the government has done with with the CPI? It is the same process, distorting reality to benefit those distorting the data. There is one difference, however. The international bankers carried out their deception in secret, ashamed to show the public their very profitable conspiracy. The government, under both parties, is open enough for just about anyone concerned to see that they're rigging the game. Since it is so beneficial to both parties, just about nobody complains.

People know when they're unemployed. They know when their communities are suffering in a very real way. They know that it's harder and harder to keep up financially, that their incomes are inadequate to buy the necessities and get a break now and then. The deliberate manipulation of unemployment, inflation, and other data to put a smiling face the economic collapse isn't working very well lately.

It's time to clean house of those who deliberately manipulate information vital to public awareness and debate and to dismiss those who enabled this ongoing deception through affirmative efforts or silence in the face of obvious distortions.


This article may be reproduced with attribution of authorship and a link to this article.



Appendix: Unemployment Definitions

U-3 (BLS) Total unemployed, as a percent of the civilian labor force (official unemployment rate)
U-6 (BLS) Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force
SGS Alternative (SGS): 'The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994 [workers are dropped from the discouraged worker status after 12 months and no longer appear in unemployment statistics]. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers."

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