The real unemployment rate for December 2012 is closer to 23 percent, not the 7.8 percent reported by the Bureau of Labor Statistics, according to economist John Williams.
Williams, author of the Shadow Government Statistics website, argues that the federal government manipulates the reporting of key economic data for political purposes, using methodologies that tend to mask bad news.
In the BLS news release Jan. 4, the unemployment rate for December 2012 was reported to have remained unchanged at 7.8 percent.
Williams recreates a ShadowStats Alternative unemployment rate reflecting methodology that includes the “long-term discouraged workers” that the Bureau of Labor Statistics removed in 1994 under the Clinton administration.
The BLS publishes six levels of unemployment, but only the headline U3 unemployment rate gets the press. The headline number does not count “discouraged” unemployed workers who have not looked for work in the past four weeks because they believe no jobs are available.
Williams has demonstrated that it takes an expert to truly decipher BLS unemployment statistics. For instance, in Table A-15, titled “Alternative measures of labor underutilization,” the BLS reports what is known as “U6 unemployment.”
The U6 unemployment rate is the BLS’s broadest measure. It includes those marginally attached to the labor force and the “under-employed,” those who have accepted part-time jobs when they are really looking for full-time employment. Also included are short-term discouraged workers, those who have not looked for work in the last year because there are no jobs to be had.
Since 1994, however, the long-term discouraged workers, those who have been discouraged for more than one year, have been excluded from all government data.
While the BLS was reporting seasonally adjusted headline unemployment in December 2012 was only 7.8 percent, it was also reporting the broader U6 seasonally adjusted unemployment in December 2012 was 14.4 percent.
In his subscription newsletter, Williams contended the “headline changes” reported by BLS for the December 2012 unemployment rate of 7.8 percent “lack statistical significance.”
“To the extent that there is any significance in the monthly reporting,” he said, “it is that the economy is not in recovery, and that unemployment has made a new high, at a level that rivals any other downturn of the post-Great Depression era.”
The only measure BLS reports to the public as the official monthly unemployment rate is the headline, seasonally adjusted U3 number.
Williams calculates his “ShadowStats Alternative Unemployment Rate” by adding to the BLS U6 numbers the long-term discouraged workers, those workers who have not looked for work in more than a year but still consider themselves to be unemployed.
Williams believes that his ShadowStats Alternative Unemployment measure most closely mirrors common experience.
“If you were to survey everyone in the country as to whether they were employed or unemployed, without qualification as to when they last looked for a job, the resulting unemployment rate would be close to the ShadowStats estimate,” Williams explained to WND.
The headline BLS unemployment rate has stayed relatively low, because it excludes all discouraged workers, Williams argues.
As the unemployed first become discouraged and then disappear into the long-term discouraged category, they also vanish from inclusion in the headline labor force numbers. Those workers still are there, however, ready to take a job if one becomes available. They are unemployed and consider themselves to be unemployed, but the government’s popularly followed unemployment reporting ignores them completely.
Here is a more complete unemployment table that includes the seasonally adjusted unemployment percentages for U3 unemployment, as well as the same for U6 unemployment, followed by the ShadowStats Alternative Unemployment rate for both December 2011 and December 2012:
Increasingly, critics like Williams believe the seasonally adjusted U3 numbers reported by the BLS as the official monthly unemployment rate do not give a reliable picture of the true magnitude of unemployment in the United States.
The definitions used by the BLS exclude from the calculation of the monthly U3 unemployment rate anyone who has not looked for work at any time during the past four weeks. Those workers are considered to be “discouraged” and “not in the labor force.”
In the U6 calculations, the discouraged workers are only those who have actively looked for work in the past year.
The BLS definitions don’t consider those who would look for work if there were a reasonable chance they could find employment.