http://news.newsmax.com/?Z6ORXWf7APAf484IFMzkDjum6QlzNJRAZ
3. Unemployment Far Worse Than Official Rate
The method used by the Bureau of Labor Statistics to calculate the official unemployment rate understates the real unemployment problem by a significant margin.
The official rate stood at 5 percent in January 2008, shot to a high of 10.1 percent in October 2009, and came down to the current rate of 8.6 percent — still 3 points above the 1948-2007 average of 5.6 percent.
“Unfortunately, the reality is even worse than these numbers suggest,” according to American Enterprise Institute resident scholar Aparna Mathur and Matt Jensen, an economic researcher at AEI.
In an article on the RealClearMarkets website, they point out that the BLS defines the labor force as those who are employed or those who have actively looked for a job within the past four weeks. The rate calculation therefore excludes workers who have stopped seeking work, and employees who settle for part-time jobs because they cannot find full-time employment.
But the Bureau of Labor Statistics also publishes an alternative measure of unemployment, referred to as the “U-6 rate,” that includes those who have looked for work in the past 12 months and those who work part-time even though they would like full-time jobs.
“The U-6 rate offers a clear picture of how precarious a situation we are in,” the authors declare.
That rate has moved from 8.8 percent in December 2007 to 17.4 percent in October 2009 and 15.6 percent last November. So the gap between the official rate and the U-6 rate is a hefty 7 percentage points.
Also, more than 5.7 million Americans have been out of work for more than 27 weeks — 43 percent of all unemployed.
“The tremendous increase in long-term unemployment is one factor driving the unprecedented disparity between the official measure of unemployment and the alternative measure,” the authors write.
Expectations of higher tax rates and uncertainty over new regulations are encouraging businesses to hold off hiring full-time workers and instead offer part-time and temporary jobs, they say, adding: “The main challenge facing the Obama administration is to improve the employment situation. An easy way to start is by restoring faith in the economy and providing certainty about the future in the minds of consumers and businesses.”
Replies