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Bizarro World: Is The True US Unemployment Rate 65 Percent Rather Than 5.1 Percent?

This is a syndicated repost published with the permission of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

Unemployment measures are all about HOW you count the numbers.

For example, The Federal Reserve wants you to believe that the civilian unemployment rate has fallen to 5.1%. That is, the number of unemployed divided by the size of the civilian labor force.

jnemp

Looks good, doesn’t it?

Well, if we include those NOT in the labor force in with those for are unemployed, the number changes from 5.1% to 65%. This is consistent with the decline in average hourly wage growth YoY.

unemplywage

Since 2010, for every person who dropped off the unemployment rolls, another joined the NOT in labor force rolls. Hence, a fairly consistent 65% rate since 2010. And for every person who is employed, there are TWO who are either unemployed or have dropped out of the labor force.

According to the Bureau of Labor Statistics, who is not in the labor force?

Persons not in the labor force are those who are not classified as employed or unemployed during the survey reference week.

Labor force measures are based on the civilian non-institutional population 16 years old and over. (Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces.) The labor force is made up of the employed and the unemployed. The remainder—those who have no job and are not looking for one—are counted as “not in the labor force.” Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force.

So, let’s call it the un/non employment rate? It does paint a different picture of the health of the labor market.

We are truly in Bizarro World.

bizarro_world-baseball

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