While everyone loves to focus on the headline unemployment rate as a reason to say the economy is doing well, especially those at the Fed trying to justify hiking rates into a recession, or those in the current administration trying to establish a legacy of being a market whisperer, the facts get in the way of that narrative.
We continuously remind those who are interested in the truth that the number of Americans who are no longer in the labor force has hit an all time high of 94.7 million. If one were to factor in the low labor force participation rate, the actual unemployment rate would be significantly higher than the 4.7% headline.
According to CLSA economists, who have updated an analysis we first did in the summer of 2010, if the participation rate stayed at the levels before the financial crisis, the unemployment rate would be 9.6%, more than double what it is today.
CLSA = Credit Lyonnais Securities Asia.
They are a solid equity research and economic analysis group.
But Zero Hedge should have told us that.
Most American economics experts would agree with them.
Based on the facts, our unemployment rate is almost double what the official number shows.
For some 20 years before the 2008 crash, the participation rate was somewhere between 66 and 67% – always in that 1% window. There is no demographic reason why that rate should have been departed from (in fact, it should probably increase a little, as I see a lot of retired people supplementing their income working at stores etc.)
So if you assume that the participation rate should be 66.5% (bang in the middle), that gives an average unemployment rate for YTD 2016 of 10.8%.
By the way. I have been looking for a job for the past 6 months. Since I ran out of unemployment insurance a couple of months ago, and I have been living off of my savings and help from family, I count as “Not in Labor Force”. I am a well qualified 48 year old, looking for a job, but I do not count in the government unemployment figures.
I find it no surprise that most people who are looking for a job are simply not being counted.