Sunday, December 9, 2012

More Phony Employment Numbers

Paul Craig Roberts
Activist Post

Statistician John Williams ( calls the government’s latest jobs and unemployment reports “nonsense numbers.”

There are a number of ongoing problems with the released numbers. For example, the concurrent-seasonal factor adjustments are unstable. The birth-death model adds non-existent jobs each month that are then taken out in the annual downward benchmark revisions. Williams calculates that the job overstatement through November averages 45,000 monthly. In other words, employment gains during 2012 have been overstated by about 500,000 jobs. Another problem is that each month’s jobs number is boosted by downside revision of the previous month’s jobs number. Williams reports that the 146,000 new jobs reported for November “was after a significant downside revision to October’s reporting. Net of prior-period revisions, November’s seasonally-adjusted monthly gain was 97,000.”

Even if we believe the government that 146,000 new jobs materialized during November, that is the amount necessary to stay even with population growth and therefore could not be responsible for reducing the unemployment rate from 7.9% to 7.7%. The reduction is due to how the unemployed are counted.

The 7.7% rate is known as the “headline rate.” It is the rate you hear in the news. Its official designation is U.3.

The Bureau of Labor Statistics has another official unemployment rate known as U.6.
The difference is that U.3 does not include discouraged workers who are not currently actively seeking a job. (A discouraged worker is a person who has given up looking for a job because there are no jobs to be found.) The U.6 measure includes workers who have been discouraged for less than one year. The U.6 rate of unemployment is 14.4%, about double the headline rate.

The U.6 rate does not include long-term discouraged workers, those who have been discouraged for more than one year. John Williams estimates this rate and reports the actual rate of unemployment (known as SGS) in November to be 22.9%.

In other words, the headline rate of unemployment is one-third the actual rate.

The drop in the November headline rate of unemployment from 7.9 to 7.7 is due to a 20.4% increase in the number of short-term discouraged workers in November. In other words, unemployed people rolled out of the U.3 measure into the U.6 measure.

Similarly, a number of short-term discouraged workers roll out of the U.6 measure into John Williams’ measure that includes all of the unemployed. Williams reports that “with the continual rollover, the flow of headline workers continues into the short-term discouraged workers (U.6), and from U.6 into long term discouraged worker status (a measure), at what has been an accelerating pace. The aggregate November data show an increasing rate of individuals dropping out of the headline (U.3) labor force.” In other words, the headline rate of unemployment can drop even though the unemployed are having a harder time finding jobs.

The U.S. government simply lowers the unemployment rate by not counting all of the unemployed. We owe this innovation to the Clinton administration. In 1994 the Clinton administration redefined “discouraged workers” and limited this group to those who are discouraged for less than one year. Those discouraged for more than one year are no longer considered to be in the labor force and ceased to be counted as unemployed.

If the U.S. government will mislead the public about unemployment, it will also
mislead about Syria, Iran, Iraq, Afghanistan, Libya, Somalia, Pakistan, Yemen, Lebanon, Palestine, Russia, China, and 9/11. The government fits its story to its agenda.

A government that wants to cut the social safety net doesn’t want you to know that the unemployment rate is 22.9%. A government that wants to cut the social safety net when between one-fifth and one-fourth of the work force is out of work looks hard-hearted, mean-spirited, and foolish. But if the government reports only one-third of the unemployed and presents that rate as falling, then the government can present its cuts as prudent to avoid falling over a “fiscal cliff.”

If the “free and democratic” Americans cannot even find out what the unemployment rate is, how do they expect to find out about anything?

This article first appeared at Paul Craig Roberts' official website. Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His Internet columns have attracted a worldwide following.


This article may be re-posted in full with attribution.


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Anonymous said...

By now, I think we "get it." Anything the government says about anything is designed to mislead us. Any truth, even the tiniest, is deadly poison to a government that has build it's foundation on lies.

Actually, this gives us citizens a unique ability. Simply believe the opposite of what the government tells us and you'll know the truth with certainty!

Anonymous said...

another used car salemen!

Anonymous said...

Under Dr. Robert's hero, Ronald (tripled the debt to create a "robust economy"), unemployment in his first term rose to 10.8%.

While discouraged workers is a real issue, it is worth remembering something Reagan's former economic advisor ignores, that retiring boomers are a much larger group than new job seekers and therefore it is totally expected and natural that
fewer people will be looking for work.

As the bloated boomer generation retires, the number of job seekers will decrease each month.

When, in 20 years, 90% of them are dead, the rolls of Medicare and Social Security will also be relieved by a much smaller retirement generation, something also ignored by those screaming that SS (with a 2.7 trillion surplus which boomers paid in to cover their retirement years) and Medicare (which gives a way 30 billion a year to the drug industry under Bush's Medicare Part D bill)are "bankrupt." In fact, both have surpluses.

Dr. Robert's repeated "expose" of how the unemployment numbers are "cooked" conveniently ignores the natural decline in numbers of workers due to boomer retirement deluge.

The reason for this is that Dr. Roberts has staked his reputation on things getting worse and worse and spiraling into choaos and collapse, war and apocalypse. Any facts which might suggest things, while bad, are not as bad as claimed, is ignored.

There are many discouraged workers but there are about 4 million boomers retiring each year, which will inevitably bring down the number of people in the job market. To call out fraud on the employment figures, without taking that major fact into consideration is, itself, a form of fraud. Sufficient the evil unto the day: there is no need to inflate the discrepancy between the employment rate and the actual number of unemployed, but pretending that the boomer retirement era does not exist and will not, with no fraud involved, bring down the number of workers reveals an agenda to make things look worse than they are. This is typical for Dr. Roberts, who cannot tolerate good news or mitigating circumstances in his insistance that we are headed straight for hell.

His form of fear-mongering parades as a willingness to lose all his old friends in the name of truth, the truth being that we are headed for hell.

Anything facts which soften that assertion are ignored or denounced as "propaganda." But it's a fact, more workers are retiring each day than are entering the job market by virtue of the fact that the boomer generation is much larger than the generations which will follow it into retirement.

djohnston said...

"His form of fear-mongering parades as a willingness to lose all his old friends in the name of truth, the truth being that we are headed for hell."

Paul Craig Roberts achieves some degree of personal integrity by associating his name with what he writes. You, on the other hand, do not.

Anonymous said...

Bottom line, our government spokespeople and their state media are no longer a source of credible information.

Anonymous said...

To Dale

If I understand you correctly, it's OK to cook the numbers now because in 20 years time, the boomers will have died and everything will be in balance again. Never-mind that it takes the loss of a generation for that to happen.

Dr. Roberts and John Williams are comparing apples with apples: calculating unemployment today as they did many years ago. Today our government wants us to believe 7.7% of something is smaller than 25% of something different.

It's not fear mongering to look at REAL numbers as they are today and coming to a negative conclusion. It's called reality.

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