Another Random Act of Verbiage...

About that unemployment rate…

poorrichardsnews:

Yes, I know we’ve covered this already (monthly, it seems), but it bears repeating: The sole reason that the unemployment rate is declining is because people are dropping out of the work force altogether. Last month, nearly 350,000 people left the work force. That’s 350,000 people who are no longer counted.

From The Federalist:

According to new data from the Bureau of Labor Statistics (BLS) released this morning, the U.S. economy last month added 74,000 new payroll jobs, while the unemployment rate fell to 6.7 percent from 7.0 percent. Good news, right? Not really.

Yes, the unemployment rate has fallen significantly from its high of 10 percent in October of 2009. But it turns out the unemployment rate has been falling for a pretty depressing reason: people dropping out of the labor force. Last month, 347,000 workers dropped out, effectively sending the message that it wasn’t even worth looking for work anymore.

…To understand how the labor force numbers affect the unemployment rate, it helps to understand how the unemployment rate is calculated. First, BLS determines who is a member of the civilian non-institutional population: people who are 16 years of age or older who are not inhabitants of institutions (prisons, mental institutions, etc.) and not active duty members of the U.S. military. Next, BLS determines what percentage of those individuals are members of the labor force: that roughly consists of people who are either working or are looking for work. Then, BLS determines how many individuals within the labor force are employed. Subtracting the number of employed persons from the labor force gives you the number of unemployed, and dividing the number of unemployed by the total labor force gives you the unemployment rate.

If you hold total employment constant and increase the size of the labor force, the number of unemployed persons will increase, as will the unemployment rate. A shrinking labor force, however, can completely mask a serious job shortage by excluding those who stop looking for work altogether from the calculation of unemployed persons.

Read the Rest (H/T Ace)

Don’t let you eyes glaze over. It’s important that we fully grasp what’s happening here.

In short, if there are ten eligible workers in a room but 2 of them aren’t working, the unemployment rate is 2 ÷ 10, or 20%. If one of those 2 unemployed gets fed up with trying to find a job and finally gives up, that leaves 9 eligible workers with only 1 not working. This is 1 ÷ 9, or 11.1%. In this example, 8 people were working the entire time but the unemployment rate fell from 20% to 11.1%. Yay, economy.

But that’s not all! There’s the matter of the U-6 unemployment rate (AKA the “real” unemployment rate). What’s that, you ask? It’s defined as the ”total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers.”

Ouch.

What does this mean? The economy is horrible. Numbers don’t lie.