Real Unemployment at 11%, Underemployment Around 20%

Posted by - Monday, December 12th, 2011

Official unemployment numbers – which have been hovering close to the nine-percent number for an uncomfortably long time – represent the number of people who are actively looking for work and can't succeed in that search.

Sometimes that perception can become distorted. A lot of Americans think that the unemployment rate more simply represents the number of people that do not have jobs. As much as I wish that were the case, it's not.

Those who do not have jobs and are also no longer looking for work are called discouraged workers. In November of this year, there were 1.1 million discouraged workers recorded in the United States.

The good news is that there were 186,000 more discouraged workers at that same time last year.

Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That's millions of workers leaving the workforce, and it's not because they've become sick or old or infirm. It's because they can't find a job, and so they've stopped trying. That's where Luce's calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate -- the apples-to-apples unemployment rate -- is probably 11 percent. And the real un- and underemployed rate -- the so-called "U6" -- is near 20 percent.

That being said, Columnist Mike Shedlock says real unemployment is at 11 percent and total unemployment is at a shocking 15.6 percent. Read his argument (full of charts and statistics) here...

Employment today is still lower than it was over a decade ago. Unemployment numbers looked the worst between 2008-2010. Slowly (too slowly for our liking), but surely employment rates are picking back up and official unemployment rates are gradually slipping back down.

This past November, the unemployment rate fell by 0.4 percent, bringing it down to 8.46 percent.

unemployment 2
*Image courtesy of Townhall Finance.

Take a look for yourself by observing the employment trend for non-farm jobs throughout the past 11 years. In November, our economy added 120,000 nonfarm workers to a payroll.

unemployment 1
*Image courtesy of Townhall Finance.

On the other hand, government employment is continuing a downward trend. For local and state governments alike, that downward trend hasn't been uplifted much at all since it began in early 2008.

Overall, I still stand by by claim that November was a good month. Record-breaking retail sales and the slight employment boost have many Americans clinging to some hope of real economic recovery.

But the numbers are still a bit daunting for the time being...

"According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent." [-Financial Times' Ed Luce]


There were some celebrations when the unemployment rate dropped last month. But much of that drop was people leaving the labor force. The surprising truth is that when the labor market really recovers, the unemployment rate will actually rise, albeit only temporarily, as discouraged workers start searching for jobs again.

*Quotes and indented excerpts from The Washington Post.


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