04.06.2012 0

Understanding the Unemployment Rate: March 2012

By Rick Manning — Once again, the unemployment rate dropped in March even though there are 31,000 fewer Americans employed than in the month of February.

This strange phenomenon where the government claims that 120,000 new jobs were created, yet fewer Americans are actually employed in those jobs is the result of the data being collected in two distinctly different surveys, and is just one more reason why the monthly unemployment rate no longer reflects the reality of America’s economic situation.

The truth is that 4.7 million Americans who have dropped out of the nation’s labor force are not being counted as unemployed, according to the government’s own data.  If these labor force drop outs were counted in the ranks of the unemployed, the real unemployment rate would be 10.8 percent, instead of the claimed 8.2 percent.

This brief, updated, synopsis of some of the key elements of the true unemployment situation since Obama took office in January 2009 will provide a behind the numbers look at the real state of employment in America.

Each month, the Labor Department’s Bureau of Labor Statistics takes a survey snapshot of the nation’s employment situation in an attempt to determine the unemployment rate for the nation’s non-institutionalized civilian population.

While there are many interesting pieces to the unemployment rate puzzle, I have found the following four numbers most informative and enlightening:  the non-institutionalized civilian population, the labor participation rate, the number of Americans who are employed and the number of people who classify themselves as “not in the labor force.”

There are obviously other very important statistics like the number of unemployed, which shows more than 12.7 million people who want a job and can’t find one.  The scope of the number of people who are unemployed cannot be underestimated in terms of the human toll being created by Obama’s failed economic policies.

The reason that this number is not one of the four that I focus upon is that the number of unemployed does not include those who have dropped out of the labor force, so it significantly understates the scope of the unemployment problem in America.

Of the four pieces needed to find the real state of the U.S. labor force, the first is the civilian, non-institutionalized population.  This is the number of people who are 16 years of age or older, not active military and are not institutionalized.  The chart below focuses upon the Obama Administration’s time in office from January 2009 to March 2012.  As the chart below using Bureau of Labor Statistics data shows, in the three years that Obama has been president, the civilian population has grown at a regular rate on a month to month basis by almost 7.9 million people to 242,604,000.

With 242.6 million potential workers, the Labor Department then figures out based upon a survey of approximately 50,000 households each month what percentage of these people are participating in the labor force either through actually working or looking for a job.  This percentage is known as the Labor Participation Rate.  The chart below provides the Labor Participation Rate throughout Obama’s tenure in office.  Note that the Rate has decreased by a full 1.9 percent of the pool of potential workers in just three years.  The tragic fact is that 4.7 million people have dropped out of the labor force since Obama took office.

The third component is how many Americans actually have jobs.  These can be part time or full time.    Astonishingly, in spite of an increase in the labor force eligible civilian population of 7.9 million, there are more than 150,000 fewer Americans employed today than were employed when Obama took office.

Yet, even with 7.9 million more people, and 150,000 fewer people employed, Obama is able to state that the unemployment rate has only increased from 7.8 percent to 8.2 percent since he took office.

These contradictory facts are reconciled when you learn that the total number of Americans who are no longer in the labor force has skyrocketed during the Obama term, even more than the labor force participation rate has plummeted, from 80,502,000 to 87,897,000.  This is an increase of almost 7.4 million people who no longer consider themselves to be in the labor force, 86 percent of the total gains made in the non-institutionalized civilian population.

The reasons behind these almost seven and a half million individual decisions are not known, however, an accelerating class of non-working Americans is obviously disastrous to our nation’s ability to compete economically in the world, and puts an increasing burden on those who are employed to pay for the government services that these people disproportionately utilize.

So, when you hear about the unemployment rate going down, remember that fewer people are employed today than when Obama took office and the only employment statistic actually going down is the number of people who have hope that they will find a job in the Obama economy.

That is why Americans for Limited Government has coined the term “real unemployment rate” which reflects what the unemployment rate would be if the Labor Participation Rate had remained constant throughout his time in office.

So, while Obama claims an unemployment rate of 8.2 percent, the real unemployment rate is 10.8 percent.  Because ultimately, Obama’s unemployment rate decreases are the perverse result of the destruction of American’s hope of finding work and their abandoning the workforce.

*Note:  All data is from the Bureau of Labor Statistics Employment Situation report.

Rick Manning is the Communications Director of Americans for Limited Government and the former Public Affairs Chief of Staff at the U.S. Department of Labor

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