The odd but simple figures about unemployment

On the first Friday of each month, the U.S. Department of Labor announces job numbers and unemployment figures for the previous month. During the early months of 2012, the figures looked particularly good for the Obama Administration and Democrats. Jobs were growing at over 250,000 per month, and unemployment was dropping from the 9% threshold that seemed to be the barometer that would determine whether or not Obama was going to win reelection in November.

The past several months have been odd as unemployment continues to decline (down significantly to 8.1% from April,) while the number of jobs has increased at a rate less than the rate of population growth in the United States. In April, the number of people with jobs increased by only 115,000, down from March, when the figure was a paltry 154,000.

As John Silvia, chief economist at Wells Fargo said, “If there are less people working, then your potential for what the economy can produce is reduced.”

The private sector is growing slightly, while the public sector is a veritable factory producing unemployment. Restaurants and bars produced 20,000 jobs in April. We all know how much bars add to the quality of life in America; something approximating the value of casinos. As Walter Mondale might say, “Where’s the manufacturing?”

Even before Scott Walker became governor of Wisconsin, the public sector had been hemorrhaging jobs at a cascading rate. Teachers, police officers, fire fighters, sanitation workers and others have been laid off without having their positions replaced. Pensions have been reduced and in some cases eliminated. Salaries have been decreased, at times with the salutary motive of limiting how many workers are fired.

While progressives long for the unemployment rate to go down, particularly to provide evidence that the recession stoked by President George W. Bush is in recovery, the figures can be misleading. The current U.S. work force is hovering under 155 million. The unemployment rate is calculated by dividing the number of people looking for work by this 155 million. That means that in April there were over twelve and a half million people looking for work who could not find a job.

If all 12.5 million individuals looking for work had jobs and no one was looking for work, employment would be 100%, and unemployment would be 0%. However, this mathematical equation works at any number. If only one person was looking for a job and he or she had found it, then unemployment rate would also be 0%, because no one else would be unsuccessfully looking for a job, thus making the employment rate 100%.

Last year, 86 million Americans were not counted in the labor force because they didn’t keep up a regular job search. Most of them were either under age 25 or over age 65.

There is good, bad and mixed news in the chart above. By age, the prime age for full-time workers, ages 25-54,  collectively have an unemployment rate of approximately the national average of 8.1%. Younger individuals (16-24 years of age), have an unemployment rate 2 ½ times the national average, but it’s important to remember that many of these individuals are students and only halfheartedly looking for work. Those who are between 55-64 have close to twice the national average of unemployment, and some are nearly ten years short of receiving Social Security and Medicare, and their job skills are outdated. Their stories are among the most tragic and discouraging in our society. Those who are 65 and older need work more than ever, because so many pensions have been trashed.

The biggest distortion in the figures is that there are well over twenty million stay-at-home parents working in our society. They work as hard, or harder, than others who work for corporations or are self-employed. However, they do not receive a nickel for their efforts. If these 23 million individuals were added to the 155 million conventionally in the work force, our unemployment rate would fall to 7.0%. In some countries, stay-at-home parents receive government subsidies for their efforts, thus both helping them and putting more money in circulation.

So on each first Friday of the month, when you hear the unemployment figures, keep in mind (1) that they are skewed, (2) they currently reflect the discouragement of individuals who have dropped out of the work force, and (3) they give no respect or accountability to stay-at-home parents.

We need to refine the way we measure unemployment. However, that doesn’t create jobs. We also need another stimulus package, much larger than the one of 2009, to put more individuals to work. Jobs and income are more than numbers with political implications. They are bread and butter for distressed families. Democrats need to wake up; Republicans need to grow consciences. Neither of these will be easy, but they are essential. Once again, it’s progressives who need to set the agenda and advocate it.

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It’s hard for jobs to grow when so many businesses are failing in a one block area of an affluent suburb.