The Inconvenient Truth About Unemployment


For the last 38 months, the heaviest issue weighing on the hearts and minds of Americans has been the economy. Rock-bottom demand, millions of foreclosures, and skyrocketing fuel costs have all taken their toll on the American psyche, but the most worrisome facet of the Obama economy for most families has been the prospect of unemployment. Democrats have insisted that since they took office they’ve reduced unemployment from a record high of 10.2 to a more manageable 8%, meaning 92% of working-age Americans have a job – a remarkably deceptive claim.

Unemp JC

An unemployment line in Jersey City. While the jobless rate appears to show signs of a recovery, the reality is much more grim – unemployment is still increasing!

The unemployment figures we see in media reports don’t give us an accurate picture of just how widespread the epidemic of American joblessness has become. That’s because the unemployment rate only considers people who applied for a job in the last four weeks as unemployed. How many of your friends, who could be earning extra money working a summer job, are choosing to do other things instead because they can’t get hired? None of them are counted as unemployed – but they still want a job. If they had a job, they could spend their extra cash at restaurants or on video games, further stimulating the economy. But instead, they’ll stay at home, since they don’t have to have a job with their parents paying for their essentials.

Since the unemployment rate is much higher than the 8% the president pegs it at, we can’t simply subtract it from 100 and say 92% of Americans have a job. To find out the real number of working Americans, we need to dig a little deeper. As it turns out, the Bureau of Labor and Statistics actually does track how many able-bodied Americans have a job. They do a monthly survey called the Labor Force Participation Survey and present it with the monthly unemployment numbers when they come out. I’ll never know why the media continues to gloss over this number. Maybe it’s because it’s gotten worse pretty much every month Obama’s been in office?

The number of employed Americans has declined nearly every month Obama’s been in office, yet he claims reduced unemployment is a sign his policies are working (click to view full-sized image).

The “Inconvenient Truth” about the economy is a lot clearer looking at these figures. Only 64% of Americans who could be working are doing so (the rest are either unemployed or gave up looking for work to live off of someone else). That’s down from a pre-recession level of more than 66% – which means true unemployment has gone up 2.5% since Obama took office! And yet, what do we hear on the news? “Jobless rates decline steadily to 8%…”

Either because it’s easier to use misleading unemployment rates or for more sinister and manipulative reasons, politicians have decided to ignore the fact that 36% of Americans who could be working aren’t. This doesn’t include babies or retirees, just discouraged, working-aged Americans who’ve chosen to stay home because they can’t find a job. In the Bush years this number was somewhat high too, but under Obama it’s shot up.

So whenever you hear your friends say the unemployment picture is clearing up for the Democrats, just refer them to this chart to remind them things aren’t as rosy as the left would like us to think.

Advertisements

I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

Tagged with: , , , , , , , , , , , , , , , , , ,
Posted in President Obama
9 comments on “The Inconvenient Truth About Unemployment
  1. Mr. C says:

    You make it seem as though it is only in Obama’s term that the Labor-Force Participation rate has been declining, however most experts agree that it has been declining since the 50’s through periods of both recession and prosperity http://static.seekingalpha.com/uploads/2012/5/7/saupload_lfp.jpg. In fact, it’s more than likely the recession that caused the sudden drop.

    • That’s a good point. However, in the Bush years we see it remained relatively steady, even if it declined somewhat. Under Obama the rate of decline has increased greatly. So it’s still accurate to say both that the situation is worsening under Obama and that unemployment has gone up in his 3+ years.

      • Mr. C says:

        Actually, the rate of decline increased right as the recession occurred in 2008. From what I’ve looked into on the subject, that seems to be the cause of the increased rate of decline. It is the fault of neither Obama or Bush. Furthermore, if the labor force participation is always declining (as it has been since WWII) it seems that the only way to judge and effectively convey how unemployment rates are doing is to analyze the unemployment rate instead of the labor force participation rate.

      • Well if the recession increased the rate of decline and the decline continues at that elevated rate, then the economy is continuing to worsen. Do you have any graphs of the LFPS between 1945 and 2012? I’d like to analyze the trends they produce so we can learn more about this phenomenon.

  2. Mr. C says:

    And the second graph has the periods of recession marked with a gray bar. Also, the labor force participation for the last graph is the labor force participation rate for both women and men. It appears that the rate has actually been increasing in the past years due to the number of women desiring to join the workforce, while the LFPR for men has been decreasing steadily since the 50s. If I were to throw out a theory for the recent decline, it’s that women have been dissuaded to join the workforce due to the poor economic conditions brought about by the recession, which would then lead to a rapidly declining LFPR since the rate seems to be determined by the LFPR for women.

    That is a graph for unemployment rates. Notice that as unemployment rises labor force participation rises as well. Interesting…

    • That’s very good analysis! It’s rare to find people capable of producing that kind of breakdown on the web. If you don’t mind me asking, what line of work are you in? I’m studying engineering and understanding graphs and variables is key in my field.

      In response to the actual topic, these findings lend credence to Mitt Romney’s claims that women have suffered disproportionately in this recession, which will blunt Obama’s charges of a GOP war on women.

      • Mr. C says:

        Well they probably would blunt Obama’s charges of a GOP war on women if these findings were to be used during the campaigning. Hopefully that happens, but I just don’t see anyone doing that. Anyway, surprised you couldn’t guess who I was.

      • You’re probably right. The LFPR is too complex to be explained in a reasonable sound bite without oversimplifying it, and if you don’t have a sound bite you don’t have an audience. I actually have several guesses, but this blog is busy! Just today we set a new record for weekly views and we’re nearing another milestone. Not being able to tell who’s commenting is kind of disappointing to me, but I guess it’s a good problem to have from a growth standpoint.

  3. […] the unemployment rate doesn’t even tell the full tale of just how bad the economy is – millions of people are not counted as unemployed even though they’re still looking for work. President Obama’s first “Summer of Recovery” would make you laugh if it […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Enter your email address to follow DYNAMO and receive notifications of new posts by email.

Join 2 other followers

About the Author
DYNAMOpolitics

DYNAMOpolitics

I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

View Full Profile →

%d bloggers like this: