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.
Dear 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
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