Cooking the unemployment numbers

That fact the the BLS methodology significantly understates the true rate of inflation seems fairly well accepted lately.  As recently as six months ago, only a few, like John Williams and Bill Gross, were making the argument.  But in face of runaway inflation in the US and worldwide, while our government insists that it isn’t happening, many (if not most) commentators have now ackowledged that the CPI numbers are bogus.

Now attention is focusing on the unemployment numbers reported by the BLS.  According to the BLS, unemployment stands at 5.5%, and the US suffered a loss of 62,000 jobs in June.  Bleak numbers, to be sure.  Unfortunately, it significantly understates the true unemployment picture.   Before we look at the flawed and biased methodology, however, its worth noting that BLS reported a loss of 91,000 jobs in the private sector in June, and a gain of 29,000 government jobs, to create the net loss of 62,000.  But 29,000 more folks sucking on the taxpayer teat isn’t exactly great news in my book.  Nevertheless, let it not be said that the government isn’t acting to stop unemployment.

One way the BLS cooks the books is through use of a bogus formula called the “birth/death ratio of estimated new jobs.”  Without this little slice of fantasy, which posits some 177,000 “estimated new jobs”, notwithstanding a recession, private employment would have declined by almost 270,000 jobs in June.

But that’s not the only way the number is manipulated.  As a matter of common sense, how should someone who is working part-time due to an inability to obtain a full-time job be counted?  How about someone who wants a job, but has become so discouraged that they have stopped looking?  Well, according to the BLS, folks in these categories are not unemployed!  If these categories were included in the “unemployed” column, rather than the “employed” column, then unemployment in June would have been a rather alarming 10.3%. 

Lets put that in perspective–more than one out of every ten job-desiring Americans is either without a job, or working part-time due to an inability to find a full-time job.  In BLS-speak, that equals 5.5% unemployment. 

So, to paraphrase Phil Gramm, quit your whining America.  Its all in your head.

Grace and Peace