Friday, July 16, 2010

 

Is Unemployment Over 20%?

During the economic recovery of 2003, Austan Goolsbee, a professor of economics at the University of Chicago Graduate School of Business, wrote a column n the New York Times on how the federal government cooked the books on unemployment and, consequently, didn't show how bad unemployment truly was. Goolsbee fingered Social Security disability as the primary culprit in skewing the figures.
The government reported that annual unemployment during this recession peaked at only around 6 percent, compared with more than 7 percent in 1992 and more than 9 percent in 1982. But the unemployment rate has been low only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as "not in the labor force."

In other words, the government has cooked the books. It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from "not in the labor force" to "employed" in order to reduce the unemployment rate. Nonetheless, the impact has been the same.
Now, Mr. Gooolsbee is a top economic adviser to Obama and we don't much from him about unemployment. What is the true unemployment situation?
Professor Goolsbee is now a top economic advisor to President Obama. Would he admit that the official jobless of 9.5% grossly underestimates the pain of job losses in America and do something to correct the situation?

Findings in recent IBD/TIPP polls suggest that now would be a good time to undertake such a project.

According to Labor Department data, the civilian labor force in June totaled 153.7 million people, 14.6 million (9.5%) of whom were unemployed. But in the latest IBD/TIPP poll conducted last week, 28.6% of respondents said at least one member of their household is unemployed and looking for work. This number for June was 27.8% and for May 28%.

When we project our household job-seekers rate and calculate the share of Americans who are unemployed and looking for work, we get a job-seeker rate of 24.1% for July for a total of 37 million Americans vs. the government's aforementioned 14.6 million.

The difference between our crude job-seeker rate of 24.1% and the Labor Department's jobless rate of 9.5% is night and day. The difference between our job-seekers (37 million) and Labor's unemployed (14.6 million) is a staggering 22.4 million. How does one account for 22 million people? Which is the reality?
You can quibble some over figures but it's obvious that unemployment is much worse than the government is admitting. Indeed, the government continues to cook the books and cover up the sad reality.

The other sad reality is that for the Obama administration it's all about pushing their left wing agenda, not wasting a crisis and, to a lesser degree, getting re-elected. Doing what is best for the country and its citizens is only coincidental. Good luck, America. We'll need it and a lot of determination to get through this boondoggle.

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