Leo Hindery’s “Effective Unemployment” Update


The Washington Note is posting this monthly update from business executive Leo Hindery, who has been focused like a laser over the last year on the fact that the administration has been underperforming on job creation and has been engineering a GDP recovery rather than a recovery plan focused on deep infrastructure investments and jobs. Hindery is Managing Partner of InterMedia Partners and former CEO of the Yankee Entertainment Sports Network and AT&T Broadband. He was a senior economic adviser to both the John Edwards and Barack Obama presidential campaigns and now Chairs the US Economy/Smart Globalization Initiative at the New America Foundation.
Leo Hindery-thumb-250x337-1364.jpgDear Friends,

As you read the economic news, it will be important to remember, first of all, that blips – occasional good numbers, signifying nothing – are common even when the economy is, in fact, mired in a prolonged slump. Such blips are often, in part, statistical illusions…caused by an inventory bounce” [from businesses rebuilding inventories after slashing them].
— Paul Krugman, January 4, 2010

Using its Current Population Survey of non-farm jobs, the Bureau of Labor Statistics announced this morning that in December “U.S. employers cut [non-farm] payrolls by 85,000, and that the unemployment rate remained at 10%.” It went on to say that there are now 15.3 million unemployed workers, and that since the recession began [in December 2007] employment has decreased by 8.4 million.
However, as we have been noting, the monthly BLS announcement regarding unemployment notably:

· uses a survey of households rather than actual payroll data, which is much more accurate;
· excludes changes in employment among the nation’s 11.2 million farm and self-employed workers, even though these two categories of employment represent more than 7% of the civilian labor force; and, most important,
· does not take into account the 15.1 million workers who are part-time-of-necessity [9.2 mm], marginally attached [2.5 mm], or out of the labor force because they are “discouraged” [3.5 mm].

Our Summary of U.S. Real Unemployment makes these three adjustments; it also identifies average weeks unemployed, job openings, and the jobs shortfall.
I should note that December is when the BLS revises all past numbers, and this year was no exception. Accordingly, a number of the historical figures in this latest Summary are changed from prior versions that we have sent you.
With the adjustments made:

· The number of employed workers in all three categories – non-farm, farm and self-employed – decreased by 589,000 in December instead of BLS’s reported decrease of 85,000 in only the number of non-farm workers.
· The real unemployment rate is 19.1% instead of BLS’s announced rate of 10%.
· The number of real unemployed workers in all four categories – BLS, part-time-of-necessity, marginally attached, and discouraged – totals 30.4 million instead of BLS’s single category figure of 15.3 million.
· The number of real unemployed workers has increased by 13.6 million since the start of the recession instead of BLS’s decline in employment of 8.4 million. (In contrast, we should have been creating a net 2.6 million new jobs in the past 24 months just to keep up with the natural growth of the labor force of 108,000 workers per month.)
· The economy is short about 22.4 million jobs in order to have a real unemployment rate of 5%, which would generally be considered “full employment”.

(Most of the national press now uses our real unemployment numbers one way or another, except inexplicably some of them leave out discouraged workers despite the fact that this is a huge category and arguably the most effectively unemployed of the four categories of unemployment.)
The average number of weeks unemployed for all workers is now at least 29.1 and the number of workers unemployed at least a half year is at least 9.6 million [BLS’s figure of 6.1 mm plus the 3.5 mm discouraged workers].
(Note: These two numbers are critically important measures of real employment health because of the over-reliance each week on the rolling four-week average of initial unemployment claims, which is right now around 460,000 workers. This average is in fact a very small snapshot of the economy, and it does not focus at all on those 9.6 million workers who have been out of work for a half year or longer: i.e., the 4.8 million workers who have used up the 26 weeks of benefits provided by states and are now receiving extended benefits paid for by the federal government, plus the other 4.8 million workers who are discouraged or otherwise.)
Kindest regards,

Leo Hindery


12 comments on “Leo Hindery’s “Effective Unemployment” Update

  1. Pete Murphy says:

    Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.
    Following the beating the field of economics took over the seeming failure of Malthus’ theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.
    And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated – nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs – tantamount to economic suicide.
    Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
    If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.
    Pete Murphy
    Author, “Five Short Blasts”


  2. David Billington says:

    Leo Hindery is right to try to identify the real level of
    unemployment but the same categories in earlier recessions
    should be compared if possible.
    On FDR, I thought the New Deal reduced unemployment from 25
    to 10 percent by 1936 and a premature attempt to balance the
    budget brought it up (I think) to 12 percent in 1938. In 1939 it
    began to come down as a result of preparations for war. The
    1938-39 figure might have been higher but if so I would be
    interested to know the primary source that confirms it.
    New Deal spending on infrastructure had a valid purpose
    apart from any employment effects. Critics at the time opposed
    the Tennessee Valley Authority as a retailer of electric power on
    the grounds that the TVA would compete with private utilities.
    But these utilities at the time saw no future in making larger
    private investments to serve people outside the major cities and
    towns. The larger market made possible as a result of long-
    distance transmission proved this view to be too narrow, and the
    new hydro-electricity was critical to the war effort. The question
    about infrastructure spending today is whether it will be
    effective and useful.


  3. PissedOffAmerican says:

    “And you can carp all you want about the costs of health care, but you have no absolutely no solution except to let people die”
    Well, at least thats better than her solution for the Palestinians. She doesn’t just advocate LETTING them die, she goes all atwitter at the thought of actually KILLING them.


  4. JohnH says:

    Nadine, the only place the American businesses are
    hiring is in China. In case you haven’t been paying
    attention, there was a great sucking sound of
    American jobs leaving for China during the last
    decade, which has mostly to do with their preference
    for sweat shop labor. And it has nothing to do with
    taxes. American businesses pay some of the lowest
    taxes in the developed world, yet they whine
    constantly about tax burden. And you can carp all
    you want about the costs of health care, but you
    have no absolutely no solution except to let people


  5. nadine says:

    FDR didn’t get it either. FDR became President in 1933 with unemployment at almost 25%; by 1939 the unemployment rate was still 17%.
    Obama has to stop terrifying the private sector if he wants it to hire again. Right now, there’s not a business in America that knows what its tax burden or health care costs will be a year from now, except they can guess the direction — up, way up. That severely retards hiring.
    But Obama can’t think like that. That’s why he is offering his panacea of “green jobs” again — another government boondoggle that spends $135,000 per job.


  6. David says:

    If the State of the Union speech does not launch effective jobs programs, then I will probably have to concede that Obama doesn’t get it. I definitely agree that FDR did.


  7. Linda says:

    FDR’s Washington got it.
    Obama’s Washington doesn’t get it.


  8. JohnH says:

    The view of the world from Washington–
    Job programs: $300 Billion (2)
    Ten years of health care: $Trillion (1)
    Financial bailouts and pointless wars: priceless
    Financial bailouts >$10 Trillion(2),
    “Defense” Department over 10 years >$6 Trillion
    (1)funded by revenue increases & cost savings
    (2) funded by increased government borrowing from
    China, Saudi Arabia, Japan, Russia and the Social
    Security Trust Fund
    No, Washington truly doesn’t get it.


  9. erichwwk says:

    Actually, just because their are insufficient policies to counter the jobless recovery is not proof that it is not registering on DC. It is relative entitlements, not absolute entitlements, that matter.
    Lower compensation for workers, as well as higher direct compensation for the elites, is in their self interest. One of the first acts of Ronald Reagan was to bust unions.
    Let’s not forget that Obama was a cosponsor of financial sector legislation to prohibit regulating their compensation.
    The evidence seems so overwhelming as to what would be required to more fairly share U.S. productivity increases over the last three decades, that I wonder what Leo thinks about what policies John Edwards might have pursued, had he, rather than Obama, been nominated.
    What is the advise he is giving Obama on the “jobless recovery”? Is it different from that given to Edwards? What is his position on what “growth” is, and the whether it is private or public goods that are lacking
    Does he support California’s and other states’ request for federal aid?


  10. Carroll says:

    One thing that shows how bad it is, in this area at least, is all the Mexican labor workers have disappeared..gone..pouff.
    There use to be several thousand that worked in the timber sector for GP and WYH and in construction and even those jobs have evaporated.


  11. Carroll says:

    To answer JohnH…no it doesn’t register in Washington…or at the state level.
    I got into a conversation/argument several weeks ago with someone about Obama’s “job creation” so looked up the jobs in my state at the ESC.
    They are shown under “Recovery Jobs”….there were less than 200 state wide and all of them were either temp/11 months, no benefits, part time state employment jobs like teachers aides, drug counselors and etc….really pitiful. Then I looked up nation wide under Federal jobs…they were all under the Forestry Service. I can’t see any “jobs” in the private sector that have come from the recovery act at all…they are all in the state and federal job system.
    Construction,highway, commercial and etc are at stand still state wide. In my town a bridge repair was underway and has now been been shut down indefinitely so we can’t use the bridge at all.
    But then the state took 1.8 billion from the state highway fund to pay the 1.8 billion shortfall in the state employees health care fund.
    State employees don’t pay anything for their health insurance if they work for the state for 5 years/now 10 years..so NC taxpayers foot the medical bills for all the state retirees. Our new governor has informed us we will have tax increase to cover this problem.
    This country is so f’ed up it is hard to even comment on.


  12. JohnH says:

    Does 20% unemployment register at all in Washington?
    Does the fact that health insurance premiums are up
    20% register with Washington? Apparently not.
    All that matters is that the stock market is up 20%.
    Politicians funders are still feeling no pain.
    Last night I decided to start carrying around a sign
    that says, “Vote for Neither.”


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