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Rising unemployment masked by phony statistics

by Lewis Loflin

Update: real unemployment rate over 22% December 2009. Economist John Williams, publisher of www.ShadowStats.com, estimates that the peak of unemployment in non-farm unemployment at 22.1 percent,numbers not seen since peak unemployment during the 1973 to 1975 downturn.

The Clinton administration changed the way calculates unemployment statistics by excluding "discouraged workers," those who had given up looking for a job because there were no jobs to be found.

Since the Clinton years, discouraged workers looking for a job for more than one year are not counted as "unemployed" because they are considered to have dropped out of the labor force. The BLS still includes in "U6 Unemployment" calculations short-term discouraged workers, as long as they have been looking for a job less than one year.

This definition permits the Obama administration to under-report "U3 unemployment" at 10.2 percent when real unemployment as calculated before the Clinton administration redefinition is twice that amount, www.ShadowStats.com contends, and U6 unemployment lies somewhere in between.

They claim, "The convenience is that by reporting unemployment at 10.2 percent instead of at 22.1 percent, the Obama administration can clearly continue advancing the argument the U.S. economy is in recovery and the recession is over, even if the truth belies those claims."

Let's consider a few facts from the Kingsport Times-News February 19, 2002:

Northeast Tennessee has lost at least 2,100 manufacturing jobs since last July, including more than 1,300 this year alone. Tri-Cities metropolitan area recorded a net loss of 1,400 manufacturing jobs from December 1999 to December 2000.

At the same time, the region gained 2,200 service-producing jobs. In all, the region posted a net gain of 800 jobs...."manufacturing jobs tend to pay higher wages and salaries than those in service-related industries. As a result, the region's overall payroll may be declining, despite a net gain of jobs."

The fact is these statistics are way understated. What is not discussed is the fact poverty rates are directly proportional to real unemployment rates yet this region suffers poverty rates almost five times the official unemployment rate. Here is the real reason why:

According to Virginia Employment Commission, only those actively drawing unemployment compensation are treated as unemployed. Most benefits last about six months, so after six months unemployment goes down even if there are no jobs. This is further distorted by the way jobs are counted. The figures are inflated by counting every part time job held by children and retirees into the mix.

A better indicator of employment is the poverty rate and the number of children on free and reduced lunches at school. In Bristol, 46% of children are on free/reduced lunches. This was up from 41% in 1995. Dickenson County had has held steady at 57% from 1995 to 2002. Dickenson County, Virginia is all coal, while Bristol isn't coal at all. By the time we count in the massive loss of jobs in Bristol in 2003-2004, they should be near equal. Bristol and Dickenson County had the worst unemployment rates in early 2004. The unemployment rate went down, but the labor force dropped as well. ING Investments ranked Tri-Cities in general at an almost 24% poverty rate in 2001.

Now an update for 2008. According Edwin S. Rubenstein October 05, 2008: September Data Shows Immigrants Displacing American Workers - Especially Blacks:

The U.S. economy shed 159,000 jobs in September, the worst showing since March 2003, the Labor Department reported Friday. Since the start of the year (2008) 760,000 payroll jobs have been lost...More than 120,000 stopped looking for work and left the labor force.

They are not counted as unemployed; as a result the national unemployment rate did not increase - remaining at 6.1 percent. The rate of Black unemployment soared to 11.4% in September from 10.6% in August. This came despite a whopping decline in Black labor force participation rates. Black employment fell by 360,000, or 2.3 percent.
More here.

To quote A Hidden Toll on Employment: Cut to Part Time Ref. July 31, 2008 New York Times (Extract)

Another tactic employed by business is the use of part-time workers. (Common in Tri-Cities.) "Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million...On the surface, the job market is weak but hardly desperate. Layoffs remain less frequent than in many economic downturns, and the unemployment rate is a relatively modest 5.5 percent. But that figure masks the strains of those who are losing hours or working part time because they cannot find full-time work - a stealth force that is eroding American spending power."

"All told, people the government classifies as working part time involuntarily - predominantly those who have lost hours or cannot find full-time work - swelled to 5.3 million last month, a jump of greater than 1 million over the last year. These workers now amount to 3.7 percent of all those employed, up from 3 percent a year ago, and the highest level since 1995..."

They go on to claim Hispanic men got it worst, but always use the term to cover up mostly illegal aliens, which distorts the whole labor picture. To quote Donna Tucker, executive director of the Santa Rosa County (Florida) Chamber of Commerce, "illegal immigration creates havoc within the system because businesses that used illegal labor often did not pay into workers' compensation funds and paid workers less. Those businesses can survive a lot longer than the ones that are trying to do things right." (NYT 6-9-2008) Illegal aliens are often a hidden workforce used to replace legal workers, but are counted as workers. Thus the dispalced worker that gives up hunting for a job is never counted as unemployed.

To quote, (Losses) from the spring of 2007 to the spring of 2008, 73 percent were men and 35 percent were Hispanic. Some 28 percent of the jobs affected were in construction, 14 percent in retail and 13 percent in professional and business services...The unemployment rate is giving you a misleading impression of some of the adjustments that are taking place...Hours cut is a big deal. People still have a job, but they are losing income."

Part time workers, even one our per week, are counted as employed. Those giving up finding a job are not counted as unemployed. To quote, "Many experts see the swift cutback in hours as a precursor of a more painful chapter to come: broader layoffs. Some struggling companies are holding on to workers and cutting shifts while hoping to ride out hard times. If business does not improve, more extreme measures could follow...

The growing ranks of involuntary part-timers reflect the sophisticated fashion through which many American employers have come to manage their payrolls, say experts.

In decades past, when business soured, companies tended to resort to mass layoffs, hiring people back when better times returned. But as high technology came to permeate American business, companies have grown reluctant to shed workers. Even the lowest-wage positions in retail, fast food, banking or manufacturing require computer skills and a grasp of a company's systems. Several months of training may be needed to get a new employee up to speed...

So they resort to partial unemployment which saves millions for them and keep official unemployment stats low. To further quote:

"More part-time and fewer full-time workers also allows companies to save on health care costs. Only 16 percent of retail workers receive health insurance through their employer, while more than half of full-time workers are covered...The trend toward cutting hours in a downturn lessens the pain for workers in one regard: it moderates layoffs. Many companies now strive to keep payrolls large enough to allow them to easily adjust to swings in demand, adding working hours without having to hire when business grows."

This also serves to keep employees intimidated and in fear: "People are scared," said Dennis Battles, president of the local branch of the United Steelworkers union, which represents about 1,350 workers there. (Goodeyear)

Note the article below, written in the 1990s, doesn't cover the massive negative impact of third-world immigration (legal and illegal) that has made the problem far worse.

Lewis Loflin

The Sinking of American Labor

It's well known that poverty and unemployment have always been an integral part of American society since the birth of the industrial era and capitalist market economies. But in the 1990s, Americans are facing new kinds of poverty and unemployment. Previously, poverty and unemployment in America were more or less cyclical. Today, they are becoming permanent structural features of this society. A whole new social class of people is being created here -- people whose labor is simply no longer needed in the economy because of technological change. Economic productivity has created a large, permanent class of those whom society cannot use and does not respect.

While the experts predict a glowing future for those maximum twenty percent of the U.S. population who will earn their bread by manipulating information in highly specialized ways, they are silent about prospects for the remaining eighty percent. The United States has already become a society with a obscenely prosperous minority at the top, a downwardly mobile working class in the middle, and a marginalized so-called "underclass" at the bottom.

Unemployment: Fudging the Figures

According to official numbers by the U.S. Bureau of Labor Statistics, as of January 1999, only 5,950,000 million Americans were unemployed. But the truth is that while the current official national unemployment rate in the United States stands at a low 4.3 percent, there are far more people than that who are either out of work, only able to find part-time work, employed at below poverty level wages or employed below their skill level. Official jobless figures are only the tip of the iceberg. In contrast to many European countries, the United States, in compiling jobless data, excluded persons without employment who had stopped looking for work.

People who want to work but are discouraged about job opportunities and so have given up an active job search are not counted here as unemployed. Instead, they are considered not to be in the labor force. Part-time workers who wanted full-time jobs are nevertheless counted as fully employed. People working even as little as one day a week are categorized as "employed."

About two million Americans, for example, are "on-call" workers who are called to work as needed -- sometimes for one day, sometimes for longer. Substitute teachers meet this definition. Such a methodology for determining the extent of unemployment in America is symptomatic, at the very least, of the lack of official concern regarding the problem. Many might say, with good reason, that it reflects an intent to mislead.

Many independent economists accept that the true level of unemployment in the United States of America is at least double the official figure. Even former Commissioner of Labor Statistics, Janet Norwood, after declining reappointment in 1991, began speaking out on the inadequacies of government data. Not only did she acknowledge that the unemployment numbers were misleading, but she also said, "I am very worried, extraordinarily concerned, about the polarization I see going on in our country."

The discrepancy originates in the methodology of calculating unemployment rates: only those signed up at the unemployment office are being officially counted as unemployed. The six million officially unemployed persons consist solely of those who are registered at state unemployment centers as actively seeking for work. Many millions more have concluded that pursuing nonexistent jobs is futile and have dropped out of statistics altogether.

Millions of discouraged people aren't being counted and are simply disappearing from official U.S. unemployment statistics. This discrepancy also reflects the fact that many unemployed people are simply hard for a government bureaucracy to track. Unless a person qualifies for unemployment benefits, they are virtually impossible to identify. Even people who once qualified for unemployment fall out of the system once their benefits end.

Such absurd accounting conveniently overlooks too many people who for various reasons are unlikely to register at state centers: Native Americans on reservations, where unemployment reaches as high as seventy percent; black youths, whose unemployment hovers above fifty percent; the discouraged homeless people who quit looking for work; and all those workers with only part-time work who are presently being counted as fully employed even if they work as little as only one hour per week -- maybe... According to the latest Employment Situation Monthly Report from the Bureau of Labor Statistics, as of January 1999, there were as many as 3,562,000 part-time only workers.

All these uncounted people must be included if one is to arrive at the true level of unemployment in America. The U.S. Labor Department's euphemism for them is "distressed workers," and after only a very quick look at the latest Employment Situation Monthly Report, it is clear to me that there are at least eight million Americans in this category.

And then, there are another eight million Americans who call themselves self-employed consultants or independent contractors. "Many are downsized professionals who are too proud to admit that they are unemployed, who set up their own consulting firm and may even have a few clients, but who make very little income and would be delighted to have a regular job," economist Lester Thurow says.

Thus, yes, the true level of unemployment in the United States of America is at least two times higher than the official rate. The real situation of American labor is that, all told, in addition to the officially unemployed, nearly thirty-five million people -- about one-fourth of the labor force -- are potentially looking for more work than they now have.

Economist Lester Thurow puts the number even higher, asserting that "well over a third of our work force is looking for more work." In 1992, for example, distressed workers totaled 36 million, or forty percent of the American labor force, according to the Washington-based Economic Policy Institute. During this same time period, official unemployment was recorded at "only" 7.6 percent.

Note that as of February 2009 the official unemployment rate is around 7.6%. In December 2009 it was 10%.

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