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May 13, 2008 / Toby Dayton

U.S. Unemployment Is Somewhere Between 9-12%

harpers-cover-2.jpgIn a May Harper’s Magazine (by far the best magazine in print today) article entitled “Number’s Racket,” Kevin Phillips sheds light on the horrendous corruption perpetrated by the federal government over the past 40 years in manipulating major economic statistics to paint a rosier picture of the U.S. economy than is actually the case. In summarizing the issue, Phillips states (it’s a long quote, but worthy of reprinting)…

Since the 1960s, Washington has been forced to gull its citizens and creditors by debasing the official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past 25 years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.

The corruption that Phillips details in the article relates to inflation, as measured by the Consumer Price Index (CPI), Gross Domestic Product (GDP), and monthly unemployment data released by the Department of Labor. While the first two are interesting and worth reading about, the unemployment figures are particularly relevant here.

The ‘Pollyanna Creep’ with unemployment data began with John F. Kennedy, who felt that high jobless numbers in 1961 “marred the image of Camelot-on-the-Potomac.” He appointed a task force to study changes, and shortly thereafter, the unemployment numbers were modified to exclude ‘discouraged workers’ who had stopped looking for work. Nixon followed by attempting (albeit, unsuccessfully) to force the Labor Department to report whichever was the lower number between the seaonally adjusted or unadjusted number.

In the 80s, Reagan succeeeded in reducing unemployment numbers by reclassifying military personnel as employed rather than outside the workforce. Under Clinton, the Bureau of Labor Statistics further modified the numbers associated with discouraged workers. While JFK excluded them from the ranks of the unemployed, they were counted as being part of the larger workforce. In 1994, the BLS redefined the workforce to include only that small percentage of the discouraged that had been looking for work for less than a year. As a result, 4 million adults were removed from the monthly data, the group some now call the ‘Hidden Unemployed.’ The Clinton administratioon also reduced the number of households surveyed from 60,000 to 50,000, with most of the 10,000 households removed located in the inner city.

The net result of the consistant, bipartisan manipulation is that the nation’s true unemployment rate is and has been for over 40 years, significantly underreported. While today’s official unemployment number hovers around 5%, the actual unemployment number is somewhere between 9-12%. Returning to the other two areas detailed by Phillips, the actual rate of inflation is between 7-10%, and U.S. economic growth since 2001, with more accurate data than the annual GDP figures, has been mediocre at best.

While the causes of the current economic mess are complex and multi-faceted and responsibility should be borne by many, it certainly hasn’t helped that the economic statistics that drive so many financial instruments have been thoroughly corrupted by Washington politics.

[tags]Harper’s Magazine, Kevin Phillips, Key Economic Statistics, Core Inflation, Consumer Price Index, Unemployment, U.S. Unemployment Figures, Real Unemployment, Data Manipulation, U.S. Economic Data, Washington Keeps Screwing Things Up[/tags]

One Comment

  1. Nick Reddin / May 15 2008 12:14 pm

    Toby,

    Excellent article I appreciate you pointing it out – this is something I have talked about but it is hard to get real data behind it. I guess I will have to add Harpers to my subscription list.

    Nick

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