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Townhall
Finance...
Despite
What You’ve Heard,
Unemployment Rate Rising not Falling
by Mike Shedlock
December 5, 2011
In
Unemployment Rate Dips to 8.6% as
487,000 Drop Out of Labor Force I presented some quick facts on the
drop in the
unemployment rate.
In
the last year, the civilian
population rose by 1,726,000. Yet the labor force fell by 67,000. Those
not in
the labor force rose by 1,793,000.
In
November, those “Not in Labor
Force” rose by a whopping 487,000. If you are not in the labor force,
you are
not counted as unemployed.
Were
it not for people dropping out of
the labor force, the unemployment rate would be well over 11%.
Labor
Force and Unemployment Rate
Adjusted for Population Growth
Reader
Tim Wallace responded with a
very nice set of graphs and commentary. Wallace writes ...
In
the entire history of the labor
force data, only in 1951, 1961, 1964, and 2009 did the labor force
“shrink”. It
also “shrank” in 2011 off 2010. Also note that from 1964 to 2007, only
in 1991
at 631,000, 1995 at 723,000 and 2002 at 801,000 did the labor force
fail to add
more than 1,000,000 people.
However,
in 2008 the labor force only
expanded by 776,000. This was followed by a loss of 826,000 in 2009, a
trivial
gain of 155,000 in 2010 and a loss of 67,000 in 2011.
If
you look at the average labor force
growth from 1948 to 2007 of 1,579,000 the labor force should have
expanded by
6,316,000 2008-2011. Instead the labor force expanded by a mere 38,000!
Thus,
6,278,000 people are unaccounted
for in the unemployment numbers based on historical averages.
The
final graph takes the adjusted
data and calculates the unemployment number off the adjusted workforce
and
those that actually have jobs. The unemployment numbers using this
historical
trend method show the following numbers for November in these years:
Unemployment
Rate Adjusted for
Population Growth
2007
4.7%
2008
7.3%
2009
11.7%
2010
12.4%
2011
12.2%
I
am sure it is just coincidence, but
it is interesting to note that the flat lining of the labor force began
in
earnest with the Obama administration.
Tim
Thanks
Tim!
Chart:
Labor Force Seasonally Adjusted
1948 to Present
Chart:
Labor Force Seasonally Adjusted
1948 to Present Years 2008-2011 Adjusted to Historic Growth
Chart:
Unemployment Rate Adjusted for
Normal Labor Force Growth 1948 to Present
Due
to boom demographics, a slowing
rate of increase in the labor force was to be expected. Instead the
bottom has
fallen out for 3 years.
Conclusion
Those
who think the economy is
improving based on the falling unemployment rate are looking at a
statistical
mirage based on an extremely atypical and prolonged drop in the labor
force.
See
the charts, read the article &
others at Townhall Finance
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