By Rick Manning || Each month, the U.S. Labor Department’s Bureau of Labor Statistics (BLS) releases America’s unemployment rate as economic analysts and politicians everywhere wait with baited breath. However, what was once a straightforward calculation has become the source of controversy as to whether it is even still constitutes a valid economic indicator.
One thing is clear, America’s unemployment rate no longer accurately reflects the state of the U.S. employment situation as a stand-alone statistic.
Why not? Because of its failure to include vast numbers of Americans who no longer are participating in the labor force as unemployed.
“The monthly unemployment rate has become a meaningless statistic that no longer reflects the reality of America’s economy or even the state of our nation’s employment,” says Bill Wilson, President, Americans for Limited Government. “Shockingly, the stated rate of 8.3 percent does not include the 4.4 million Americans who have dropped out of the labor force since Barack Obama became president. When you include the dropouts, the real Obama unemployment rate is 10.8 percent.”
There are four pieces of the unemployment puzzle: 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 to consider – like the 12.8 million people who want a job and can’t find in Obama’s failed economy – but these four indicators provide the basis for a more accurate calculation of America’s unemployment rate.
First, let’s look at the civilian, non-institutionalized population. This is the number of people who are 16 years of age or older, not active military and who are not institutionalized. The chart below focuses upon the Obama Administration’s time in office from January 2009 to February 2012. As you can see, in the three years that Obama has been president, the civilian population has grown by about 7.7 million people to 242,435,000.
With 242.6 million potential workers, the BLS then determines – based upon a survey of approximately 50,000 households each month – what percentage of these people are participating in the labor force either through actual employment or job hunting. This percentage is known as the labor participation rate. The chart below provides a glimpse at this statistic throughout Obama’s tenure in office. Note that the rate has decreased by a full 1.8 percent of the pool of potential workers in just three years – meaning 4.4 million people have dropped out of the labor force since Obama took office.
The third component to consider 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 7.7 million, there are more than 100,000 fewer Americans employed today than were employed when Obama took office.
Finally, the number of Americans who are no longer in the labor force – by their own description – has skyrocketed during Obama’s term from 80.5 million to 87.5 million, an increase of more than 7 million people. The reasons behind these seven million individual decisions are obviously 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 when 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 8.3 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.
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.