Is The Government Misrepresenting Unemployment By 32%?

Tyler Durden's picture

There is an old saying, "when in doubt follow the money." These days investors have lots of doubt about pretty much everything (if not so much money). And with data from the government increasingly bearing the Quality Control stamp of approval of the Beijing Communist Party, there is much doubt in store courtesy of an administration which will stop at nothing in its competition with China as to who can blow the biggest asset bubble the fastest, data integrity be damned. Undoubtedly, of all government released data, the most important is, and continues to be, anything relating to unemployment. This is precisely where the government's propaganda armada is focused. Yet in matters of (un)employment, the ultimate authority is, luckily, the Treasury, and not the Fed. "Luckily," because when it comes to making money "difficult to follow" Tim Geithner's office still has much to learn. Which is why when we looked at the Daily Treasury Statement data we were very surprised: because it indicates that the government could be underrepresenting employment data by up to 32%!

The suddenly very prominent topic of Unemployment Insurance, whether it pertains to Initial Claims or to Emergency Unemployment, has one very useful characteristic: it is based on "money", specifically money outflows from the US treasury which goes to fund the weekly "paychecks" of those that have not been in the workforce for well over a year. And as pointed out earlier, money can be followed. The US Treasury presents a daily in and outflow of all money sources in the Daily Treasury Statement prepared by the Financial Management Service. And in the plethora of data presented here, probably the most relevant and useful data series is the Withdrawals quantified in the form of Unemployment Insurance Benefits.

Compiling the monthly data of Treasury Disbursements for Unemployment Insurance Benefits and then superimposing it with the total number of people receiving Insurance Benefits as disclosed by the Department of Labor is a useful exercise, as the two series have historically correlated with an R2 of well over 0.90. Below is an indexed comparison of UIB outlays and Unemployment Insurance Receivers for Fiscal 2007.

Surely this is logical: the more unemployed collecting benefits from the government, the more the outlays.

Yet what struck us is the when this chart is presented from 2007 until today. Something unusual emerges. An absolute chart of the money spent by the government superimposed with the total insured unemployed is presented below:

Yet the best way to see what this chart indicates is on an indexed basis with a September 2007 baseline.

What becomes obvious is that a correlation which used to be almost 1.000 has diverged massively, and now the relative outlays surpass what the government highlights are the number of people actually collecting benefits by 32%! This implies two things: either the average unemployment monthly paycheck has surged, which is not the case, or there is some gray unemployment area which is not disclosed by the government, and which accounts for a shadow unemployed insurance economy. Because while the DOL indicates there are about 9.5 million total unemployed, for the correlation to return to its near 1.0 trendline the number of unemployed on benefits has to be 14 million. At least this is what the actual cash outlays by the Treasury suggest: the government spent a record $14.7 billion on Unemployment Insurance Benefits as of December 30, a 24% jump sequentially from the $11.8 billion in November. Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid: from 9.4 million to just under 9.6 million. To put the $14.7 billion number in perspective, in December the Federal Government paid a total of $14 billion ($700 million less) in Federal Salaries! A cynic could be temped to say that effectively the number of people employed by the government is double what is disclosed. A yet bigger cynic could claim that America is now the biggest socialist state in the world. Both cynics would not necessarily be wrong. 

And some more perspective: in calendar 2009 the government has paid $140 billion in Unemployment Insurance Benefits. This is yet  another economic stimulus that nobody in the administration discusses, yet which undoubtedly has the biggest impact on the economy, as all those millions unemployed can moderate their pain courtesy of a passable weekly check from the government which should just about cover the rent and beer. Which is why more than anything, Obama is dead set on extending insurance benefit payments in perpetuity: because if the 10 million official and 14 million unofficial people who are on benefits (not to mention the tens of millions of unemployed unlucky enough to even get their weekly allowance from Uncle Sam) start thinking about their true predicament and their real "employability", then a landslide loss by this administration at the mid-term elections will actually be an upside surprise to what it can objectively expect.

h/t Michael

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mrhonkytonk1948's picture

Government understating the problem?  I am shocked, I tell you.  Shocked.

Fritz's picture

"This is precisely where the government's propaganda armada is focused."

Government propaganda is now a growth industry in the US.

VegasBD's picture

Prolly why D.C. is the only state/territory in the country that has job growth pushing 10% while every other one is contracting.

Karston1234's picture

then a landslide loss by this administration at the mid-term elections will actually be an upside surprise to what it can objectively expect. Degree Program
University Degree
business management degree

haibop's picture

32% is really a big number, this is really shocking! Lose Thigh Fat

bugs_'s picture

A third possibility is they are sliding some

extra to certain states via this mechanism.

I wonder if the outlays could be broken

down by state to see if the 32% anomaly

is nicely distributed or if it is focused on

a specific state (or set of states).

mikla's picture

A third possibility is they are sliding some extra to certain states via this mechanism.

That was my thought too -- I expect 2010 to be a year of "loans" made from the Fed to states to help with state budget deficits, when everyone knows these "loans" will be forgiven.  Look first to California, then to New York, Arizona, New Jersey, etc.  They can rationalize this along the lines of the continuous "extend emergency unemployment benefits" plans that Congress keeps passing.

Regardless, this is a huge catch, Tyler.

Of course we are talking about human tragedies, and we know that this was not the preferred choice by many people.  However, this is merely paying people to not work, and it's getting seriously tempting to sit around the house for the next couple years to collect unemployment.

knukles's picture

As an expat in 60's UK I fortunately had a front row seat watching the destruction of the human spirit.  Unlimited unemployment benefits ("on the dole" as it was called)socialized get my drift.  Moral hazard writ large at the individual level. 

Significant, untractable unemployment annually addressed with stimulus packages and a central bank's politically motivated overly easy monetary policy.

Our very own precursor, a singularly self-evident economic and investment model for the upcoming decade; slow growth high unemployment, large and growing deficits, high inflation, beggar they neighbor currency devaluation. 

All from the home of Lord Keynes, himself. 

Happy New Year.

ft65's picture

I had just started the world of work in 1978 an apprentice in a UK nationalised industry. I lived through the 1980's seeing the insdustry I worked for Privatized (because it was not right the state to be an employer) I also saw the revenue from North Sea oil pay for people to sit at home. Now in the UK, one house hold in five (with people of working age) have no one working. North Sea oil is on the last part of the Hubard Bell curve, and many banks are now Nationalized. Things looked bleak to me in the 1980's. Where on earth are we headed, or will Carbon Trading be the answer to all our prayers. I'm currently taxed at 43%, how much will the gubberment allow me to keep in future?

Enkidu's picture

Perhaps a better place to live though! I would prefer to be your average guy in UK than in the US - at least you can see a bloody doctor. US 'capitalism/socialism' depends on people living close to the edge. Give me the Home of Keynes any day!

Anonymous's picture

Virgin Atlantic 399. so what are you watting for..

Anonymous's picture

what's stopping you from seeing a doctor? All you have to do is GO to one.

ghostfaceinvestah's picture

Collect pogey and stop paying your mortgage, you could have a very nice life of leisure for a good 18 months - no work, plenty of disposable income to spend.  Better yet, have some nice high limit credit cards at the ready to max out.

Sounds like the American Dream to me.

merehuman's picture

It feels awkward to earn and work hard,in the rain as my fingers get cut from installing sheetmetal around the chimney. I look to the east, towards Wahington where the money I work for is GIVEN away. All around me there is government money for free. Why the hell i still work and give callouses and cuts in exchange for the green paper is beyond me. Time to get off the Roof. 

I quit. Never been on dole in my life. It just doesnt make sense to work anymore

Screwball's picture

I don't think you'll get on the dole if you quit.  But go ahead, there are plenty who will gladly take your job.

merehuman's picture

Actually I am self employed licensed  contractor. Went from doing one house every 2 weeks to one per six months. Living on the silver i bought and food stored months ago. Finding great comfort in the garden and thankful i thought ahead. We did a reverse mortgage, so there is no rent. Now its  a 2,000.00$

tax bill on the house. I will be fine due to Zero hedge and all you folks who post here. I have been learning from you. Thank you all very, very much!

Oh , yea it took a while but now granny wants to read ZEROHEDGE too.

Ah life is wonderful even in the worst of times.Change is always possible and what if you didnt have this life? 

As I see it job one is to awaken the public, cause the machine is bigger than the few awake now, witness the lack of indictments, the cowardice of the regulators. 

Those without computers have no idea, tv is very persuasive. We need a one page flier exposing the truth and consequences in a simple but profound way

understandible by all or most. Charts and links would be good too. Distribute this via net, utube, we all volunteer to print and distribute nation wide.

Altho i am truthful , i am not the best communicator. Perhaps we could try a flier competion for making best case simply. First defining what should be included as there is alot of territory to cover.

From gold and silver suppression to outright fraud with ETF shorts, more with tungsten 400 oz bars. Ft knox in doubt , regulators bought,lies in statistics  and the dollar in danger.   What say you? Shall we do more than talk?

Fish Gone Bad's picture

As Mark Twain once said, "People who do not read the newspaper are uninformed.  People who read the newpaper are mis-informed.".

Time to turn off the TV and invest in yourself. 

Anonymous's picture

In answer to your question, yes.

cougar_w's picture

Doesn't make sense to work for someone else.

Quit and use your time to take care of family and community. Nobody else is doing that and it needs to be done. When the SHTF family and community will be all you have left, and will keep you alive.

The Joe that hired you before will be enjoying the profits from years of your service.


Screwball's picture

Sounds like a good plan - that is, if you have the money and resources to take care of family and community.  Many have worked under the man for years, and when they lose that, they are pretty much fucked.  Maybe it's different where you live, but where I live, the community doesn't give one good shit about me.  So I don't expect anyone to help me.  Agreed on Joe, but that's the way it is, and always have been, so I'm good with that.

The comments above remind me of things I see too often, IMHO.  While there are plenty who take advantage of the system, there are many that don't, but collect UI because they must.  Just because someone is taking government cheese in the form of unemployment, doesn't mean they are a lazy dirtbag who doesn't want to work.  Besides, if someone (government included) is giving something away, the line to take it will be long.  The word FREE will fill any building at any time.  People love free shit, and it doesn't matter what their personal balance sheet looks like.

Degrading people who aren't working and collecting unemployment seems to be a common thing to do (not saying you are), but there are many who would love to work given the chance.  I think the brush of criticism is too wide. It's tough out here right now for many, for no fault of their own.  Life isn't fair, I'm not arguing that, but thinking my community will take care of me is wishful thinking IMHO.  When push comes to shove, you lose, in this country it's all about me.

Bottom line; not all want the free handout, they just want a job.

I always look forward to your comments cougar, but this one I'm not sure I can go along with.  I do reserve the right to have misinterpreted your comments.

MsCreant's picture

Let me support this with the fucking obvious that everyone seems to miss regarding unemployment compensation:


Anonymous's picture

EXACTLY RIGHT MsCreant +100.

It's called Unemployment INSURANCE; we PAY for it. Would you skip paying the dentist using your dental insurance because people might call you a freeloader?

Anonymous's picture

The employer pays for it, at least here in California. The amount that is paid into the fund by employers is nowhere close to what is being paid out to recipients. Any funds collected by the state for unemployment claims are long gone. It is simply money being printed up to be given out now.

MsCreant's picture

You are correct, I am wrong. My arguement works if you are collecting welfare and foodstamps, not unemployment. Thanks for saying something.

naiverealist's picture

Just a fine point, but the employer handles the bookkeeping.  You pay for the unemployment insurance in lieu of wages (at least that is one way to look at it).


My bottom line, the people on the bottom rung pay for everything.

Old Poor Richard's picture

First, you didn't pay in, your employer did.  And only 13 weeks was paid for.  The other 86 weeks you've been on welfare.  But unlike the poor single mom who has to prove she's needy to collect welfare, you don't have to prove a damn thing.  And also unlike the poor single mom, your check is a lot bigger.  The unemployment benefit in Massachusetts is twice the welfare benefit.

Getting rid of extended unemployment is a budget balancer which they should pass as soon as possible.  People who are unemployed more than 13 weeks need to literally go on welfare instead of unfairly collecting double payout without any demonstrated need.


Landrew's picture

Give unemployment a try for several weeks you will be screaming for work! You exist on unemployment you don't live on it. I don't know anyone that can live on unemployment. In IL. the Max rate equals 340$ a week. The average in IL. is 220. Be my guest I for one will keep working and carry a saddness for those without work. Shame on all that think most people don't want to work. We are a proud people and soon when all savings is exhausted people will demand work marching on Washington as they have in the past.

Anonymous's picture

Don't you know that you need 1-5 mortgages to be wealthy nowadays?

Crime of the Century's picture

I know a guy whose son has been collecting longer than his employment history. He still lives at home and uses the EUC as fun money. Obviously, Dad is part of the problem, but EUC should be tightened up in that respect. Breadwinners/family support only. Not every moron who ever held a job and now looks at the UE numbers as being in their favor.

Anonymous's picture

I've lived on $300/mo for 7 years. I've gota get a job. Desided that the job needing doing is to fix the economy. fix - frank . com

Anonymous's picture

I understand where you are coming from. But you;ve got one of those few jobs that can't be sent out ot china so I'd say keep it for a bit longer.

Anonymous's picture

Would $14 billion monthly in new outlays be inflationary?

Considering too that those people will not be able to service much of their debt, they will default (deflationary), BUT the fact that they are not producing any surplus that translates into taxes and will need relief for the long term foreseeable future may mean decrease in money supply in total. But those funds are printed and distributed which is very dilutional.

What about the never-to-be paid back state's loans?

Those too derived from tax revenue or the printing press?

Brave new world gets another nasty turn in a host of hairpin curves.

Cursive's picture

Because while the DOL indicates there are about 9.5 million total unemployed, for the correlation to return to its near 1.0 trendline the number of unemployed on benefits has to be 14 million

An additional 5.5M unemployed?  We know the annual adjustment in February is to be roughly a 800k to 900k upward revision to the unemployed.  Following the line in the post, an even bigger cynic might say that this is the "Household Sector" from the FR Flow of Funds report.

blindfaith's picture

lets not forget the small businessman who is SOL and can't even get any benefits and are NOT be counted at all. 

DaDa...I am one whos income has gone from 60K to under 5k IN 18 MONTHS.  19 of 22 stores (our customers) in 9 states closed in that period and all those folks (and their help) out of work too.  Count all the small business owners and the unemployment rate is more like 32%!!! 

Yet our local school teachers, county employees and police just got RAISES because they exist not because they are doing a better job...just because they exist.  They have NO idea that they too are the next in line for a hair cut, and are indifferent to the hair cuts their tax payers are indifferent attitude that reaches to DC and Wall Street, and corporate boardrooms.

msorense's picture

I'm with you as a small business owner but thankfully I'm doing allright at this time.  See this article from Mish's blog:

As the guy says, the small business owner doesn't stand a chance.  We all must prepare for what will be a massive dollar collapse that will occur in the next two years.  Most POS government employees have been immune to pain and uncertainty thus far, but their existence is owed a printing press running on full and a dollar that still carries value.  I don't think the latter will make it to the end of the year.  If we are prepared (food, guns, gold), we will be able to watch their world come crashing down with eager anticipation!

merehuman's picture

Blind faith. Thank you for mentioning us. When i think about giving fair value for the dollar as my back hurts from the days labor , it comes to mind that with a mere phone call thousands, nay millions are made in a moment. My paltry 200.00 per day  average earnings ceased months ago. Meanwhile ballplayers are having fun on the court and they too make millions. Its become to easy to make much money for those SPECIAL people.

I have never felt  so much like a slave and fool as I do now.


cougar_w's picture

You are not a fool, but in many respects you are a slave, because you have no choice and it is uncertain given the situation in the world that you have any real chance to change your situation. The divide between them as has and them as do not is now too great to hurtle.

Hang in there. You remain a human even when they treat you like an animal. Do not forget that.

There is no shame in any of this. It is imposed from the outside. It is unjust, it is evil, it is a stain in the course of Western culture.

It will all pass in time along with the institutions that created the chasm nobody can cross anymore.


Anonymous's picture

It is cold comfort, but viewing the "typical collapse function" will galvanize your understanding of what is happening in the economy and to you personally.

Those connected to the machine of D.C and Wall Street will garner more and more of printed currency as the gov't desperately (but ultimately futilely) tries to stave off the collapse. Real workers producing real goods and services suffer most because they participate solely in the exponential decline. It leads god-fearing, rule of law respecting people often to revolt.

Consider this. Many of those making the most income would not be able to trade it a corner flea market. No one truly would want them. All the paper markers and promissory notes gather interest only because they slake mankind's greed. They draw money and income only because of a promise of growth or protection.

It is a secret society, and age old system of plunder. This generation has the pleasure of suffering its total consequence. Nuclear devices raining upon your head might actually be preferable.

Anonymous's picture

Babylon iz Burn brother, u r a slave, the sooner u realize it, the sooner you will be able to change it. Do what u feel is right and best for u and urs; but the system u have grown up with is about to implode. Believe it or not, the choice is urs; it will make little difference in the end.

"Welcome to the desert of the real."

Anonymous's picture

Thank you, blindfaith. Right there with you.

Anonymous's picture

Excellent observation, blindfaith. As a multi-decade owner/operator of several small businesses in various locals, I have never witnessed such widespread, deep economic distress as is currently unfolding. I have Fortune 500 companies abruptly very late in paying their invoices ... small mom and pops with increasingly empty shelves, very sparse vehicular traffic in normally congested areas, etc. Meanwhile, Calpers reports my small town (just south of SF) has a municipal retiree receiving $187,000 in benefits and payments in 2008 - almost 4K a week. Good luck in that keeping up in the future.

Anonymous's picture

I am also have a small business....or should I say HAD a small business. Two years ago I had six employess, now its just me -due to the economy. December was my worst month ever...Billed a whole $75-

moneymutt's picture

i do have to say the govt employee friends I know are clueless about how much the rest of us are taking it on the chin and we will have to clue them in...when they started their careers, many of them were making less than private wages but went for the better benes, which at the time were a bit better than private. 20 years later things are so different...regular middle class working in private industry had been gutted but meanwhile govt employees have done well. Their pay is often much better than private, there benes are way way better, the biggest being defined pension benes regardless of how market investment does. A friend who is public defender whose department has experienced no lay-offs was complaining that they might not get a raise this year I had to shut her up and mention that not a single person in private business I knew had gotten a raise in two years and nearly 70 percent of people I knew had gotten wage cuts, furloughs, reduced hours, or reduced earnings from small businesses or sole proprietorships, if not laid off.

The city of Mpls was complaining for the first time they could not afford to hire their fresh class of recruits. But a cop can retire at 90 percent salary under the age of 55 and their salaries are about 4-5 times what a private security professional makes. I have a friend that worked for the state of MN for 7 years at end of career and is getting $700/month pension from much would one have had to save to get $700/month earnings from principal.

Crime of the Century's picture

Yet our local school teachers, county employees and police just got RAISES because they exist not because they are doing a better job...just because they exist

I hate to rub salt in the wound, but it is even worse than that in areas. A RI news team followed state labor fraud investigators around, and found four of them filing false itineraries. When they were supposed to be investigating people ripping off the taxpayer, they were instead (wait for it)... ripping off the taxpayer! Shopping, running errands and heading home early all while they swore they were doing the state's business. These are well paid, union protected positions. How protected? All four are on PAID "admin" leave during the internal (CYA) investigation.

ulvy's picture

Don't count on teachers getting a haircut.  The teacher's union in Kansas is suing the state to get back their budget cuts. 

Seal's picture

Cute. The ‘Household Sector’ is using its unemployment benefits to buy Treasuries! LOLOLOL


docj's picture

Solid B+, I tell you.  Solid.