Sunday, March 11, 2012

Understanding the “Unemployment Rate”

By Rick Manning

“The monthly unemployment rate has become a meaningless statistic that no longer reflects the reality of America’s economy or even the state of our nation’s employment. Shockingly, the stated rate of 8.3 percent does not include the 4.4 million Americans who have dropped out of the labor force since Obama became president. When you include the dropouts, the real Obama unemployment rate is 10.8 percent,” Bill Wilson, President, Americans for Limited Government.

Each month, the Labor Department’s Bureau of Labor Statistics releases the unemployment rate to the breathless anticipation of economic analysts and politicians everywhere. As Wilson points out above, what was once a pretty straightforward calculation has become the source of controversy about whether it is even still a valid economic indicator.
One thing is clear, the unemployment rate no longer accurately reflects the state of the U.S. employment situation as a stand-alone statistic due to its failure to include vast numbers of Americans who no longer are participating in the labor force as unemployed.

To understand how the Labor Department determines the unemployment rate for the nation’s non-institutionalized civilian population and put it into context is not difficult if you are aware of four pieces of the unemployment puzzle: the non-institutionalized civilian population, the labor participation rate, the number of Americans who are employed and the number of people who classify themselves as “not in the labor force.”

There are obviously other very important statistics like the number of unemployed, which shows more than 12.8 million people who want a job and can’t find one cannot be underestimated in terms of the human toll being taken by Obama’s failed economy.
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