The Real U.S. Unemployment Rate

Trend: The number of jobless Americans is increasing to levels unseen since the Great Depression, with unpleasant ramifications for consumer spending.

Don Miller at Money Morning describes the statistics about unemployment that the government doesn't publicize.

Link: U.S. Unemployment May be a Bigger Problem Than Government Statistics Say.

The official government estimates of the current unemployment problem are staggering in their own right. 

• 791,000 manufacturing jobs were lost in 2008, hitting the auto sector hardest.
• 260,110 people lost jobs in the financial sector, part of the overall service sector that accounts for some 80% of all employment.
• The construction sector shed 899,000 since peaking in September 2006.
• The retail sector shed 522,000 jobs for all of 2008.

All told, 2.6 million people lost their jobs in 2008. And, to underscore the accelerating nature of the problem, more than half of those job losses occurred in the final four months of the year. In December, a total of 11.1 million were unemployed. An additional 8 million people were working part time – up sharply from 7.3 million in November.

The average workweek in December fell to 33.3 hours. That’s the lowest average on record, dating back to 1964, and a sign of more job reductions to come since businesses often cut hours before eliminating positions entirely.

Those are the “official” government numbers. But, as a closer look demonstrates, the unemployment figures can be understated – and misleading.

The government actually compiles unemployment figures in six different categories; as you might expect, the numbers tend to minimize the bad news.

The most commonly number quoted in the media is the “official” unemployment rate – known as U3 (the bottom line of the three in the chart below) – which now stands at 7.2%.

But to get the real picture, you have to add both in what the government refers to as "discouraged" workers (U4) and "marginally attached” workers (U5) – those who have stopped looking for work, or who haven’t looked for work recently (represented by the middle line of the three in the chart).  That number (U6) depicts an unemployment rate that’s approaching an eye-popping 14%. 

If you include the people that the government doesn’t even count – such as unemployed farm workers, the idle self-employed, and workers in private homes – the unemployment rate approaches an astonishing 18% (top line).

In other words, unemployment has insidiously spread to almost one-fifth of the U.S. work force, a number much larger than the single-digit figure commonly bandied about in the press. 

Fully 70% of all domestic economic activity is powered by consumer spending. People who are unemployed cannot buy homes, don’t shop heavily in retail stores, cut back on groceries, and are loath to take on added risk.

Overall, 48% of all companies downsized in 2008, and a staggering 60% are planning reductions in 2009, according to a Society of Human Resource Management survey.
Economists predict a net total of 1.5 million to 2 million or more jobs will vanish in 2009, and the “official” unemployment rate could hit 9% or 10%, underscoring the challenges that new U.S. President Barack Obama will face and the tough road ahead for job seekers.

Obama has called the jobs losses "a stark reminder of how urgently action is needed" to revive the nation’s staggering economy. His administration is planning a stimulus package costing upwards of $800 billion, consisting of tax cuts and other ways to try to help individuals and businesses.

But unemployment is feeding into a vicious cycle that Washington policymakers are finding difficult to break.  The jobless are now forcing almost all U.S. consumers – employed or not – to retrench for an uncertain future.

Comments

[manny]

A depression is near.

[jobseeker]

Does anyone know if there are charts or tables breaking down the U6 levels state by state.

[non-profit Jeff]

Thank you this article was very concise and helped me understand the differences between the many different numbers I've been reading. I think that many people do want to dig a layer or two deeper than what the media presents, and it's articles like this that help people find the truth.

[jobseeker]

When the foreclosures really get rolling and the banks let the properties sit empty, will the jobless quietly accept living on the street?

[Jeff]

Is depression here or not? not very clear. But if you look at the past history recessions and depressions come and go. (see for instance,
http://www.recessioninfocenter.com
Economies go through cycles and recession is part of the cycle. Too much government interference can backfire and it seems like that's what the governmetn is doing now