What's The Real Unemployment Rate In The US?

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

By my reckoning, roughly 60% of the civilian work force is fully employed and 40% are marginally employed or unemployed.

Officially, the unemployment rate in the U.S. is 5.6%, meaning 5.6% of the work force is temporarily out of a job and actively seeking another one. This low number reflects nearly full employment, as 3% to 4% of the work force is typically in the process of quitting/being laid off and finding another job.

Typically, periods of nearly full employment are economically good times, as household income is bolstered and employers have to pay a bit more to hire workers when the labor market is tight.

But these do not feel like good times for most households, despite the low unemployment rate. Earnings are stagnant for 90% of the work force, and employers are only paying a competitive premium for workers in very select fields (programmers adept at Python and mobile user interfaces, etc.)

This creates a cognitive dissonance between the low official unemployment rate and the real economy, which is behaving like an economy with much higher rates of unemployment, i.e. sluggish hiring, stagnant wages, difficulty in finding jobs, and very little pressure on employers to pay more for typical jobs.

Let's start by trying to calculate the work force--the number of people who could get a job if they wanted to. This isn't quite as straightforward as we might imagine, because the two primary agencies that compile these statistics use slightly different categories.

The Bureau of Labor Statistics (BLS) calculates the civilian noninstitutional population as everyone 16 and older who is not in active-duty military service or in prison. The BLS reckons this to be about 250 million people, out of a total population of about 317 million residents: Household Data (BLS)

The BLS subtracts 93 million people who are not in the labor force, leaving about 157 million people in the civilian work force--roughly half the nation's population.

Of these, 148.8 million have a job of some sort and 8.6 million are unemployed.

The Census Bureau calculates the civilian noninstitutional population as everyone who is not in active-duty military service or in prison. (You can download various data on the U.S. population on this Census Bureau website: Age and Sex Composition in the United States: 2012. I am using Table 1 data.)

The Census Bureau places the civilian noninstitutional population at 308.8 million in 2012. Since roughly 4 million people are born and 2.6 million die in the U.S. each year, we can adjust this upward by roughly 3.5 million to bring it up to date (mid-2015) to 312 million.

About 74 million people are 17 and younger, and 36 million are 68 and older. Given that the full-benefit retirement age for Social Security is pushing 67, I am using 67 as the cut-off for the work force rather than the traditional 65.

This is of course a squishy calculation, as many people retire at 62 and others work beyond the age of 70. But given the strong employment trends of the over-65 cohort, I think it fair and reasonable to include everyone between 18 and 67 in the work force.

Subtracting 110 young people and retirees leaves a civilian work force of around 200 million people. Let's then subtract those who can't work or choose not to work for conventional reasons. There are roughly 8 million people on permanent disability and several million more at any one time on temporary disability, so let's subtract 10 million disabled.

Next, let's subtract stay-at-home parents. Since there are 20 million children under the age of 5, let's reckon 20 million adults will on average choose to leave the work force to care for their children full-time.

Should this number be 40 million? What about home-schooling? Given the possibilities for part-time, home-based and free-lance work, I am reluctant to conclude everyone caring for or schooling their children cannot possibly earn some income. But let's consider adding another 10 million adults who may be caring for their families (seniors as well as children) at home full-time.

While it may seem as if every other hipster in town is a trust funder, i.e. a person who draws upon inherited wealth and doesn't need to work, Internal Revenue Service (IRS) data reports less than 2 million people draw substantial incomes from trusts. Since even those with unearned income can still perform work, I include trust funders in the work force.

If we subtract 10 million disabled and 30 million stay-at-home parents, we have a work force of around 160 million--not far from the BLS number of 157 million. If we use a smaller number of full-time stay-at-home parents, then perhaps the work force is closer to 170 million.

The BLS calculates what it calls labor force participation rate--63% of the total civilian noninstitutional population is in the labor force.

The next issue is what we reckon qualifies as a job. In general, the BLS and the Census Bureau count anyone with earned income as employed. The BLS reckons 148.8 million people have jobs, but this includes 23 million people who earn less than $5,000 annually. The Social Security Administration (SSA) states that 155 million people reported taxable income, which includes not just earnings (wages and salaries) but distributions from retirement funds, IRAs, etc. that are taxable. Wage Statistics for 2013.

The question boils down to this: should we count someone who earns $1,000 a year as employed? How about someone who earns $5,000? At what point does an income enable a person to support himself/herself? Should we place those earning incomes far below a living income in the same category as those with full-time jobs/incomes?

This is where I part company from the government agencies' classification of any earned income in any amount as qualifying as a job. If I am a consultant earning less than $5,000 annually, clearly I cannot support myself on this income. If I earn $2,500 annually in part-time free-lancing, this is at best 10% of poverty-level income for a household in a low-cost region; in a high-cost region, it is perhaps 5% of poverty-level income.

The BLS attempts to define a broader definition of under-employment and unemployment in its categoryU-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force: this is 10.8% of the work force.

Depending on how we calculate the work force, and if we count everyone with any earnings as employed, we get an unemployment rate of somewhere between 5.6% and 12.5%. If we use the BLS's metric for including under-employment, this is in the range of 10% to 15%.

Common sense suggests that we calculate employment/unemployment based on earnings, not just any income in any amount. If we reckon that only those with earnings of $15,000 or more annually (roughly speaking, full-time work at minimum wage) are fully employed, then the numbers change dramatically.

The $15,000 annual earnings are also a rough benchmark of self-supporting households: two wage-earners making $15,000 each would have a household income of $30,000--enough to get by in much of the country.

About 50 million people earn less than $15,000 annually. This includes roughly 10 million self-employed and 40 million with part-time jobs or other sources of earned income. This suggests that only 100 million of the 160 million work force are fully employed in the sense of not just having a job but making enough to be self-supporting.

There are many caveats resulting from the way that government social welfare is not included in earnings: thus a household might have two part-time wage-earners making very modest sums monthly who are getting by because they qualify for Section 8 housing, SNAP food stamps, Medicaid healthcare, school lunch programs, and so on. These programs enable the working poor to support a household despite low earnings.

Should we include those depending on social welfare programs as fully employed?

By my reckoning, roughly 60% of the civilian work force is fully employed and 40% are marginally employed (i.e. earning less than $15,000 annually) or unemployed. Since full-time workers even at minimum wage earn close to $15,000 annually, I think it is fair to use that as the cut-off for fully employed. The BLS counts 121 million people asusually work full-time, but given only 100 million workers earn $15,000 or more, this doesn't add up unless we include self-employed people earning very little who are counted as full-time workers.

Based on income, I set the fully employed rate at 60%, and the marginally employed/unemployed rate at 40%. If we accept the BLS's 121 million full-time jobs (which once again, this doesn't make sense given even minimum wage full-time jobs earn $14,500, and 50 million people report earnings of less than $15,000), we still get a marginally employed/unemployed rate of 25%: work force of 160 million, 121 million fully employed.

These numbers align much better with the real economy than the official unemployment rate of 5.6%. It's nonsense to count everyone earning a few hundred or few thousand dollars annually as being employed in the same category as full-time workers or those earning $15,000 or more annually.

 

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Shocker's picture

We know the unemployment is much more than what is being reported

Layoff / Closing List: http://www.dailyjobcuts.com

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Commodore Decker's picture

Couple that with declining wages and the middle class gets DP'd.

MonetaryApostate's picture

Donald Trump promises to be the greatest Job Creator ever...

Trump for President...  >>>   https://www.youtube.com/watch?v=3VXuXM8WME0&feature=youtu.be

(I'd vote for him, would be the first person I've ever voted for other than Ross Perot)

froze25's picture

Trump works in the environment that he has to work in.  If he is given the opportunity to change the environment to a more business friendly one.  Other than Rand Paul, I would vote for him as well.  At least he isn't Ivy league Mafia clown like the rest of em.

MonetaryApostate's picture

Well to all the down voters, I say....  Enjoy Hitlery or Bush (The 3rd)....

Heavy's picture

Does Pamama still run that residency deal?  Anywhere else?

Alvin Fernald's picture

Maybe you could vote for the Devil.
Why waste your vote for the lesser evils and really go for it this time?

A Nanny Moose's picture

how about the Underemployment rate?

cynicalskeptic's picture

shadowstats.com

We're as bad off as we were in 1932 - or worse.  You don't see people on soup kitchen lines and selling pencils on the street like back then because of the government 'safety net' but you're seeing unprecedented demand at food pantries, high levels of homelesness and more than enough other signs of real stress and problems.  The media isn't reporting this (at least not they way you'd expect ) because MOPE - management of perspective economics,  pure propaganda: 'All is well', go out and spend - is actually government 'policy'.    

It's easier to lie than try and fix things - not that they want to 'fix' anything.  We're in an endless pursuit of the cheapest possible labor cvcosts - all 'savings' and 'productivity increases' go to corporate officers and owners - none are shared with the workers.  At least Taylorism at the turn of the last century believed that you SHARED gains in efficiency with workers and bettered EVERYONE's lives (though company owners 'shared' far more of the increased profits than the workers)

dreadnaught's picture

They had 'Relief' back then but most were too proud to take it.

SumTing Wong's picture

There was a guy at the light by the Wal-Mart just the other day. He had a sign that said he was a vet, and he was...selling pencils to people stopped at the traffic light.

The_Dude's picture

I think we are missing a category.....The Gov. needs to include a stat for 'Grey Market Employment' and include it in U3+ILL'.  These are the people that work cash jobs and still collect .gov bennies and support.  That would get the UI rate down to <0%. Negative Employement Rate .....NERP, NERP baby!!

Miles Ahead's picture

Amazing.  The ZeroHedge nuts stay on this NAACP official Rachel Dolezal thing for 3 days.  Something new???  Starting to resemble The Huffington Post or Daily Mail.  My goodness.  So she wants to be black.  So does Kim K. And...?

Bill of Rights's picture

It takes three days to calculate how much of a fuck'en nut job she truly is.

knukles's picture

We're all just trying to adapt to the New Old McDonald's Farm
Reptialians.  I been telling you people for years, it's all about shape shifting Reptilians.

Consuelo's picture

Don't Bogart all the Steve Quayle - I need some too...

 

 

Miles Ahead's picture

... pot

calling the kettle black.

Bill of Rights's picture

Welcome to thunderdome asshole.

MonetaryApostate's picture

You'll be rolling pot before long....

BlowsAgainsttheEmpire's picture

Agreed.  Boring story - more appropriate for the wing-nut news sources like Fox, Washington Times or Rush.

PartysOver's picture

Yes, and the NY Times is the Stalwart of credibility.  Nuff said.

Miles Ahead's picture

I don't think there was any free-pass for the NYT.  I'm sure he understood it was a given they're garbage distributors too.  They - along with WaPo, USAT, ChTrib, etc.

Thank god for RT.

BlowsAgainsttheEmpire's picture

LOL!

 

I trust the NY Times about as much as the Washington Times.  

suteibu's picture

If you do not see the correlation between Dolezal creating her own history and the government creating its own statistics, you fail to fully understand the depth of America's problems.

Miles Ahead's picture

Oooohhh, that's what that was about.  Whoooosh!  Right over my head!  Government statistics?  So that's the problem?

Methinks you fail to fully etc. etc.   Govt. creating it's own money out of thin air... I was too busy focusing on that.  And govt creating WWIII... a little bit more important than some chick rebelling against being boring vanilla, longing for some flavor...  just sayin'.

NoDebt's picture

What the fuck are you talking about?  You might have noticed this is NOT a story about dear, confused Rachael.  But that's what you're complaining about here?

If you don't like the story, don't read it.  How fucking hard is that?  I pass by most of the stories about Greece now and those ARE related to finance/investment.  Why?  Because, like you, there's some subjects I'm just fucking sick of and don't give a shit any more.

The problem here ain't the stories, friend.  It's you.

PrecipiceWatching's picture

Boring vanilla?

 

So you're actually just a garden variety, low IQ bigot.

 

Flavor?!  From the utterly dead-end, destructive black "culture"?      As fucking if....

HughBriss's picture

He's not a bigot; he's merely "expressing" himself.  Only DIABLO BLANCO can be found guilty of bigotry.  Or so I've been told by the magical talking heads on TV...

 

Viva la flavor!

rejected's picture

She exemplifies the insanity and stupidity of it all.

prmths2's picture

That's what I thought at first, but the fact that she filed a lawsuit against Howard University for discrimination against her because she was white leads me to believe that her masquerade might be rooted in cynicism and a desire to game the system that she believes wronged her as a white student.

suteibu's picture

You can focus on whatever you want to but until you have at least half the population behind you, you will only succeed in creating an ulcer. 

America has changed. 

Dolezal is an example.  America has lost its moral compass.  Everything goes.  Feel good is all that matters.  The government's fake statistics is a drug that helps the majority of people feel content while they pursue their own personal perversions of reality. 

You are picking the wrong fight on this site.  You need to go to more popular - and populist - sites and complain to them about how they are not focused on your concerns.  Flailing around here as if you are the only one that gets it will only get you ignored.

sgt_doom's picture

Moral compass?

You lost me, bubba!

I mean, are you referring to when Thomas Edison cheated Nikola Tesla, as well as all his workers?

Or are you referring to how David Sarnoff stole outrageously from Philo Farnsworth (TV) and Edwin Armstrong (FM, plus)?

WTF, bubba?

You mean Operation Brother Sam?

Or Eisenhower's attempted overthrow of the Indonesian government, killing thousands, or later Johnson's successful overthrowing of the Indonesian government, killing around one million?

Elucidate, please?

suteibu's picture

Yeah, people have done shit to others forever, most of it unknown to the public until lately. Even so, few care.  What would not have been allowed had it been known at the time is perfectly acceptable now.

If you do not see the change that has occurred in this country over the past 4-5 decades, you are either too young to remember or simply do not care to see it.

ETA:  I'm not your "bubba."

Jethro's picture

I understand what you're saying, and agree with most of it. However, the US has only ever been loosely unified from it's inception. In the past, as a whole, we shared a common history and shared basic religious beliefs (and ancillary morals and ethics). Now, with open borders, moral and ethical relativity, and everything that brings with it, those days are gone forever.

It'd be easy to blame the Baby Boomer generation for the giant mess we're in now. And to be fair, they made the vast majority of the shit sandwich we'll soon be eating. Some of that blame goes to the Baby Boomer Generation's parents, and their fairly widespread entitlement mentality (depending of course on which region in the US they are from). From Woody Guthrie, This Land is Your Land;

As I went walking I saw a sign there
And on the sign it said "No Trespassing."
But on the other side it didn't say nothing,
That side was made for you and me.

Socialist bullshit....

To the Five Man Electrical Band, Signs;

So, I jumped on the fence and-a yelled at the house
"Hey, what gives you the right?
To put up a fence to keep me out or to keep mother nature in

More Socialist drivel...

Maybe the older generation, that did put up with a fair amount of adversity only wanted the best for their children, and rarely told them no? Thus explaining the Baby Boomers?

Imagine what China is going to endure over the next few decades...

suteibu's picture

I don't think we disagree actually.  You have simply provided some of the reasons why relatively dramatic changes have occurred. 

I don't blame a specific generation as much as I blame the slow creep of generational change from the 60s then change at a more rapid pace over the past 2 decades.  One can argue whether it is an evolutionary change of society or whether it was nudged in this direction.  It is certainly interesting that just about every subset of American culture, many at statistically insignificant levels, have suddenly been given a greater voice in education, the courts, and politics than the larger society.  This can not be attributed to natural societal evolution.

Jethro's picture

I disagree that this is "natural societal evolution" when does a host willingly let the parasite kill it? This is a slow, methodical (probably unwitting given the general intelligence of our elected officials) degeneration, and simply change for the sake of change.

PartysOver's picture

"Reality is anything I damn well want it to be."  That philosophy will not have a happy ending.  And since it is also very prevalent in the USSA the USSA will not have a happy ending.

Condition 1SQ's picture

How's the trolling going today?

LoneStarHog's picture

Miles Ahead? ... Turn around ... You are facing the wrong direction ... You are actually Miles Behind!

KnuckleDragger-X's picture

Magic numbers will fix everything...for the government.....

FreeShitter's picture

Is there an app for that?

boattrash's picture

Well, they didn't count me during my 10 Mo. sabbatical, because I never filed for any benefits of any kind.
(It wouldn't be much of a break if you had to check in with Big Brother twice a week, now would it)?

I Write Code's picture

Yeah me too.   I doubt that I've been counted as either employed or unemployed over most of the past twenty years or so, no matter that I pay taxes every year.

knukles's picture

So, the 60% number includes government workers.  That drops it to about 45% or so in terms of "work", and in terms of pay, it cuts it down to about 40% because the government workers is paid for by the rest of us schmucks. 
Maybe 40% work while 60% are in some state of pretend to complete despair

Savyindallas's picture

and a large percentage of Government workers don't really work  -they surf porn and file EEOC grievances all day. 

steveharless's picture
CEO Steve Wynn: Talk of Strong Economy 'Is Pure Fiction'

"It's a jobless recovery. Because recoveries are marked by the level of real employment. And if you count the people who have left the workforce, real unemployment is 15 to 20 percent." 

http://www.newsmax.com/US/steve-wynn-wynn-resorts-economy-income/2015/05...

 

www.ViewLasVegasRealEstate.com