Wednesday, February 8, 2012

Multiple Experts Find the ‘Official’ Unemployment Rate Is Missing A Whole Lot of Unemployed People

1. Congressional Budget Office (January 31, 2012)
“The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years….Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 11⁄4 percentage points higher than the actual rate of 8.7 percent.”
2. Ezra Klein, The Washington Post (January 6, 2012)
“Unemployment is 8.5 percent — and, if not for the millions of discouraged workers who have left the labor force since 2008, it would be nearer to 11 percent. It’s nice to add 200,000 jobs in a single month, but, as this graph from the Hamilton Project shows, at that rate, it will take well over a decade to fully recover from the Lesser Depression.
3. Jay Cost, The Weekly Standard (February 8, 2012)

“The job growth over 2011 only kept up with population growth, so if the labor force had remained constant (relative to population) over the last year, the unemployment rate would have stayed the same. But we all know that didn’t happen, meaning the number of people in the labor force, as a share of the adult population, declined. The result is that the unemployment rate gives the false impression that the labor market is actually getting better, when in fact it has only stopped getting worse. If we correct this by assuming a constant level of participation in the labor force, we get a very different picture. The following graph holds labor force participation constant, as it was in January 2009 (when Team Obama produced that infamous graph showing the unemployment rate never rising above 8 percent). That is the ‘shadow’ rate, which is compared to the official rate.”
4. Hamilton Place Strategies (January 2012)
“How is labor force participation looking today? At 64 percent, it is well below the peak of 67 percent during the dotcom bubble, and significantly below the steady state of 66 percent we saw during the 2000s. Given the Baby Boom retirement and other demographic shifts, CBO projections expected it to be declining – 65.3 percent at the beginning of 2012. We are now 1.3 percentage points below that demographic estimate, the equivalent of 3.2 million “missing” workers. If the “missing” people were in the labor force, the unemployment rate today would be 10.4 percent, not the current 8.5 percent.”
5. Nomura Global Economics (January 2012)

“In the grey line, Nomura economists have adjusted the unemployment rate for the number of discouraged workers who have left the labour force and therefore count as unemployed in this alternative measure.”
6. Joint Economic Committee Republicans (January 24, 2012)

“The unemployment rate declined to 8.3% in January from 8.5% in December. However, much of the recent decline in the unemployment rate can be attributed to a decline in labor force participation. Labor force participation dropped to 63.7% in January. This is the lowest labor force participation rate in nearly three decades. Labor force participation stood at 66.0% at the beginning of the recent recession. If the participation rate had remained at the pre-recession level, the unemployment rate would be approximately 11.4%.”
7. Ways and Means Committee Republicans (February 2012)

The chart above, frequently updated by Ways and Means Committee Republicans, shows the current 8.3% “official” unemployment rate compared with the 10.9 percent rate including the “invisible unemployed” who have “stopped looking for work,” as former Obama economic advisor Austan Goolsbee put it in 2003. Meanwhile, as shown in the blue line, the Administration in January 2009 predicted that under its 2009 stimulus plan the official unemployment rate today would be 6.1 percent, or effectively at full employment.