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The World of Unemployment and the Discouraged Worker

February 5, 2010

E.J. Manning

At the sound of the new jobless statistics today, many are greatly encouraged. Because of the miracle of seasonal adjustments, the national unemployment rate now stands at 9.7%. Even though the national rate declined, 20,000 jobs were lost where forecasts estimated a growth of 15,000 jobs. While the official message is clearly designed for optimism, some caution is still in the wings, not only because the economy lost more jobs, but because there remains a darker reality behinds the scenes even as the national job trend improves on the surface.

The real figures without seasonal adjustment show a cruel reality. The Labor of Bureau Statistics admitted 16.1 million classically unemployed Americans for January compared to 14.7 million from the month before. With the miracle of seasonal adjustment, January had 14.8 million Americans unemployed compared to 15.3 million in December. In essence, the unadjusted statistical unemployment rate was 9.7% in December and is now 10.6%. To the government, a massaged unemployment rate looks much better. That is what the media is using.

When you add in those discouraged workers that are no longer looking for employment and obviously no longer on unemployment benefits, the trend is far more dismal. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them, part of what the statistics call marginally attached. January showed the largest month-to-month increase in discouraged workers since the Federal Reserve officially admitted the recession. Many have been forced into underemployment, which projects an admitted unemployment rate of 18%. This does not count previously unemployed Americans, which drop off the chart altogether in government details. The government statistics admitted that more than 6.3 million Americans have been unemployed at 6 months and 3 weeks. This does not include the numbers of unemployed at other lengths of unemployment along the way. Numbers older than 27 weeks are not publicly tracked. Despite “unemployment extensions”, the unemployed are continuing to drop off the charts, which means that actual unemployment is much higher, as high as 25% . Who is to say?

Seasonal adjustments to the unemployment rate is a great tool for showing trends, but is not what the average American should stake his life on. The unadjusted rate is more indicative of worker suffering, but still doesn’t include the plight of the underemployed that are scraping by at Wal-Mart, Dollar General and such places. These official statistics do not indicate those that have already lost homes, electricity, phones or those living with strangers, even those on the streets. After 27 weeks, the unemployed are no longer officially considered as unemployed, which ultimately improves the unemployment rate by “attrition.” This skews all the statistics that the nation has come to depend on as a monitor of economic health. Technically, the official “classical” unemployment rate is little more than a media tool. In bad times like these, the statistics become more like wishful thinking. Remember that percentages and averages can easily be misconstrued as truth when they are nothing of the sort. Still, the nation does need some solid good news and this is about as good as it gets right now.

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