Once a month or so I get a call from the business editor of our local newspaper asking for my thoughts on the unemployment rate. Because the unemployment rate is slowly edging down—although it remains stubbornly above 7.0 percent—the editor is looking for confirmation that things are looking better. Here is what I tell my friend, the business editor: The national unemployment rate is a shell game played by President Obama and other government officials in an attempt to make Americans think the economy is doing better than it actually is. In fact, the unemployment rate is just another of President Obama’s big lies. In case your reaction to this assertion is similar to the business editor’s, I will explain.
In the first place, the unemployment rate is not even the best indicator of how the economy is performing in terms of job creation. In fact, it is an easily manipulated indicator that provides an incomplete picture of economic growth, a picture that can be misleading and that can induce feelings of false optimism. Why, then, do elected officials focus so intently on the unemployment rate? The answer is simple. The unemployment rate, unless it is accompanied by the “U6” rate and the “employment rate” makes things appear to be better than they actually are. Hence, a declining unemployment rate is the politician’s best friend.
To get a more accurate feel for where things really stand in America’s workforce, it is necessary to look at three indicators: 1) the unemployment rate, 2) the U6 unemployment rate, and 3) the employment rate. The unemployment rate is simply a measure of how many people without work are seeking employment. The problem with the unemployment rate is that it does not take into account people who want full-time employment but are forced to work part-time because they cannot find a full-time job. Nor does the unemployment rate account for those who have become so frustrated with fruitlessly looking for a job that they have simply given up and dropped out of the system. Hence, the unemployment rate can paint a rosy picture when, in fact, things are not rosy at all.
It is hardly something to crow about when an engineer who previously earned $150,000 per year is forced to work part-time at Wal-Mart for minimum wage. However, the unemployment rate counts this engineer as working regardless of the disparity in his circumstances. The U6 unemployment rate accounts for this disparity, providing a more accurate picture—albeit a picture politicians like President Obama would rather you did not see. To get a feel for the difference, the national unemployment rate as of this writing was 7.2 percent but the U6 unemployment rate was 13.7 percent. The U6 unemployment rate explains why Americans still have little confidence in the much touted economic recovery in spite of minor improvements in the unemployment rate.
Perhaps the best indicator of where things are in the workplace is the employment rate. The employment rate is a measure of the number of working age adults who are actually in the workforce. Just 20 years ago, America—with an employment rate of almost 79 percent—topped the list when compared with other nations. Switzerland now leads the world at 78.6 percent. The United States—with an employment rate of 66.7 percent has dropped to 16th place in the world, lagging behind even Russia. This is not good news. When you couple this indicator with the U6 rate and realize that many of the individuals who make up the 66.7 percent are underemployed and working part-time, the picture becomes even bleaker.
Even President Obama’s supporters have begun to catch on to the smoke and mirrors game being played by those who use the unemployment rate to tout the supposed economic recovery. Writing for the Washington Post—typically a pro-Obama newspaper—Neil Irwin commented: “The proportion of the U.S. population that had a job in August was 58.6 percent. Six months earlier, the number was a whopping…58.6 percent. The year is nearly three-quarters over, and the economy isn’t growing fast enough to put a higher proportion of its citizens back to work.” In case you are wondering, the 58.6 percent Irwin writes about is of the entire population rather than the population of working-age adults. This explains the difference between his figure and the 66.7 percent I mentioned earlier.
With Obamacare forcing more and more employers to use part-time personnel instead of full-time, expect the U6 unemployment rate to increase markedly—an unacceptable circumstance President Obama ignores and the unemployment rate does not account for. Hence, the next time a politician struts on stage and brags about another hundredth of a point drop in the unemployment rate, raise your hand and ask: “What about the U6 unemployment rate and the employment rate?” Be prepared to explain your question. Most politicians won’t even know what you are talking about. But if the politician in question is Barack Obama, expect a visit from the IRS. Unlike some politicians, President Obama knows about the U6 unemployment rate, the employment rate, and the ramifications of both. He just doesn’t want you to know. I will conclude this column now. I understand that NSA personnel get bored if our columns go for more than 800 words.