UNEMPLOYMENT WORSE THAN WE THINK

November 10, 2010

Unemployment rate is awful but true impact worse

We would all agree that the nearly 9% unemployment rate we are currently experiencing is a significant problem for our economy and especially those fourteen or so million Americans without jobs. However, the overall employment situation is much worse than the Bureau of Labor Statistics numbers would indicate.

I did some research to see if I could learn how the BSL counts and tracks what is officially reported as “unemployment”. I learned that many other factors that can massively increase the negative impact of the unemployment situation are left out of the formula.

For example:

If someone works even one hour a week they are counted as employed. You only have to stop and think for a moment to imagine the huge numbers today who are not working full-time because their employers can then avoid providing benefits. These folks are technically employed, even if they and their dependents know they are certainly under-employed. These folks are in fact both under-employed and many are then without health insurance.

Let’s then add those who are enrolled in school full-time, even if they did so because they could not find work, they are not considered unemployed. This would include the huge numbers of unemployed Americans who have chosen to enroll in all sorts of schools to obtain additional training and skills that they believe are necessary to obtain employment in the future. It also includes those who having finished one level of education and then finding that they cannot find meaningful employment, have decided to continue their schooling by seeking a higher level degree that might help them find work some day.

If someone has simply given up the search for meaningful employment because they could not find work…they are not counted as unemployed. Often a significant number in this category are forced onto the public welfare system.

If someone is vastly over-qualified for the job they are currently holding (let’s say a college degreed engineer who is now forced to work in the fast food industry in order to make close to minimum wages plus benefits). They are not considered as unemployed.

If someone is self-employed…meaning almost anyone who is trying to provide services to others (plumber, electrician, painter, carpenter, realtor, etc.) but cannot find work in this horrible economy…they are not counted as unemployed.

Can you even imagine the odds of a released felon finding a job today? How do you suppose they will earn a living?

Thus while the system that has been used by the government to show unemployment rates since 1940 is technically correct for year-to-year comparison purposes, it vastly understates the true impact and personal pain being experienced by many millions more than just the “officially” unemployed and their families.

The official unemployment rate has approximately doubled since the recession began in 2007. Some estimates show that if all of the above factors were added to today’s BLS unemployment rate this would jump the net effective rate to as high as 25%.

This horrible economy was brought on by the failed policies of our political leaders from both parties and the greed and avarice within our financial industries. It is likely an understanding of the lack of available jobs on the near-term horizon that is the real the reason that most reasonable consumers are reluctant to start spending. 70% of our economy is driven by consumer spending, and this spending is what it will truly take to turn the economy around. I think most of us really do not think that our political leaders will suddenly wake up and decide that they will collectively work together to make the tough decisions that must be made in order to re-activate our economy for the long term benefit of the vast majority of Americans? It will take incredible leadership from our President and the willingness of Congress to forgo pure party loyalty and personal political ambitions to make this a reality. I wish I were an optimist about that happening…I am not!

Based on past actions, how we can expect our divided and partisan leadership to reduce deficit spending, not increase entitlements, have no tax increases, and expand the economy. Most importantly, how are we going to create job opportunities when so many millions of jobs have been sent out of America to lower labor cost countries? Do not let our leaders off the hook on this one…the primary challenge really is about the economy and jobs…period! Let’s judge their actions and results before the next election…not their rhetoric.

These are my opinions. Please let me know what you think?

Mike Tower

Hendersonville, NC

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