Low unemployment numbers help the political party in power get reelected. The Bureau of Labor Statistics, which reports the unemployment rate, is part of the Department of Labor. The Secretary of Labor is appointed directly by the President, is a member of the President’s cabinet, and is likely to be loyal to the President. For these reasons, it is not surprising that the figure commonly supplied by the government and reported by the media actually underreports the true situation.
The official unemployment rate is technically known as “Measure U-3.”1 To be counted as unemployed, a person must have actively sought a job within the last four weeks and have held no job. Measure U-3 is currently at 6.1% nationally, or 9.5 million persons.
Unemployment Rates - September 2008
Conventional Unemployment Rate
Extended Unemployment Rate
SGS Alternative Unemployment Rate
9.5 million persons
6.1% of the workforce
The serious problem with U-3 is that there are plenty of people who have a part-time job, but are still in dire financial straits and are looking for work. However, these people are not counted as unemployed. Therefore, U-3 gives a false picture of the challenges facing the American worker.
A more inclusive measure of how hard it is for people to find work is “Measure U-6.”2 Measure U-6 is currently at 11% nationally, or 17 million persons. Measure U-6 includes the data from U-3 plus:
- People who are not working and have looked for work within the past one year, but not in the last four weeks.
- People who want and are available for full-time work but have had to settle for a part-time schedule. These involuntary part-timers are counted as "employed" in the conventional unemployment rate.
A measure of unemployment that is even more inclusive than U-6 is the SGS Alternative Unemployment Rate, currently at 15% nationally, or 23 million persons.
The SGS rate includes discouraged workers who are unemployed and want to work, but have not looked for work within the past year. This class of five million highly discouraged workers used to be included in the official unemployment figures, until a change was made during the Clinton administration. It made sense to count these people and still does, because these people still don’t have jobs. Now the government only includes in Measure U-6 people who have looked for work within the past year.4
What are these highly discouraged workers doing? Did they take out a home equity loan and are living off that? Are they living off their parents? Are they homeless? Are they earning money from illegal activites? Are they simply on welfare? The Census Bureau has conducted interviews with these people, and in later blog entries we anticipate reviewing the results of those studies.
Finally, the unemployment rate among teenagers is 19.1%. A Northeastern University study found that a high rate of immigration significantly reduces job opportunities for teens.5 The study was conducted using data from 2003-2004 when the teen unemployment rate was only about 17%. Therefore, the findings are even more urgent today. Studies show that people who work as teens are more likely to work as adults, more likely to graduate from high school, and less likely to experience a teen pregnancy. There are benefits to working, even for affluent teens. Among the recommendations of the study:
“Enforce the immigration laws of the nation and require employers to live up to the spirit as well as the letter of the law”
With as many as 23 million currently unemployed, and a sharp recession or depression about to descend upon us, it is not the time to grant an amnesty to the at least seven million illegal aliens in the workforce.
3Shadowstats.com is not some “tin foil hat” website. The proprietor has an M.B.A. from Dartmouth and was one of the top students in his graduating class. The information can be crucial for making investment decisions. If you know that the unemployment rate is really four points higher than what is being reported by the government – then reality will bite no matter what the government says the unemployment rate is—retail sales will fall and you want to sell your retail stocks (Home Depot, Sears) before the sales' data is released and the price of those stocks plummets.
4Source: www.shadowstats.com “Government Economic Reports: Things You've Suspected But Were Afraid to Ask!” by Walter J. Williams, August 24, 2004.
5Andrew Sum et al., "The Paradox of Rising Teen Joblessness in an Expanding Labor Market", Report Prepared by the Center for Labor Market Studies, Northeastern University, Boston, Massachusetts, Report Prepared for Jobs for America’s Graduates, Alexandria, Virginia, January 2005.
Updated: Mon, Oct 20th 2008 @ 10:30am EDT