Thursday, September 10, 2015

People who believe unemployment rate is 5.5% are fools

So, the White House is reporting a 5.5 unemployment number, the best it's been since 2008.  This sounds good, especially considering 4.6% is considered no unemployment. This is true because it's not possible for every person to have a job all the time, as people are shifting jobs all the time.  So the 5.5% unemployment number comes out and we are supposed to be all happy and think that the recession is over.

Yet this is not true once we investigate the numbers.  First of all, we must realize that the 5.5 number is the U3 unemployment number. It does not count the number of people who have given up trying to find a job after being out of work four years. If you're not actively seeking a job and you don't have one, you're not counted as unemployed. When you count those who are no longer looking, it's called the U6 number. The current U6 unemployment rate is 10.3%.

Right now there are a record 92.8 million working age people no longer in the workforce, and that is a 37 year low (and it's been a record low now for 11 consecutive months).  The total number of people 16 and over who are able bodied people who could be working is 243 million, so that means that almost half of the people who could be working are not.

Of course the actual percentage of working age people working is currently 62.8%, which is at a 37 year low.  That means that 37.2% of working age people are not working.

What we do know is that all of these people are eating. It used to not be that way.  It used to be that if you weren't working you weren't eating, and that was your incentive to get a job.  If you weren't eating when you weren't working, you bit your pride and got any old job. That might mean working at McDonalds.  That's not the case today as a record 50 million people are on food stamps.

No matter how you look at it, people who think the 5.5% unemployment is accurate, and that it's an indicator that the economy is getting better, are fools.

Further Reading: