Saturday, August 07, 2010

'Smith, get a motorcade to take me over to Bethesda Country Club. I grow tired of the people's incessant complaints about unemployment.'

Tyler Durden once again lifts the veil on the real economy and finds the true unemployment (U-3) rate is roughly 14.7%.

The first chart below demonstrates the LFP [Labor Force Participation] rate, which a derivative of the chart we presented earlier, has now plunged to the lowest level in over 25 years, or 64.6% (gotta go back to December 1984 for the first time this was passed). So we decided to "normalize" the LFP by keeping it at the peak achieved at the turn of millennium, or December 1999, when it hit a peak of 67.1%. Now as everyone knows the US population has been soaring since then, and with the cost of living increasing ever more with each day, and as more and more family members are forced to join the work pool, it makes sense that in a normal economy, the LFP should continue rising instead of declining. We thus kept it constant at the 67.1% level (instead of doing the conservative thing and pushing it higher along the trendline), and ran the unemployment numbers through, assuming this part of the jobless equation was constant. To our surprise, we found that the U-3 rate (not the U-6), which today was supposed to be 9.5%, in fact turns out to be 13.0% as of July: an all time record save for the 13.6% recorded in December 2009. And if instead we use the trendline number of a 68.5% LFP rate, the unemployment rate today would be 14.7%. In retrospect we sympathize with Christina Romer's decision to get the hell out of Dodge... Reported and adjusted labor force participation rate:


Running these numbers through the actual unemplyment calculation, reveals the following: while assuming a declining LFP rate we obviously get the 9.5% unemployment rate, assuming a peak 67.1% LFP results in a 13.0% unemployment rate. And if the labor force participation rate were to grow according to trendline, the jobless rate in the US today would have been reported at 14.7%, just about where the U-6 was reported, but based on an entirely different methodology.


Pity the geniuses who work in legacy media haven't figured out that (a) this kind of story is newsworthy; and (b) it sells papers.

Because the logical follow-up question is: when will these jamokes figure out that the economic damage is intentional?


4 comments:

  1. Anonymous6:18 PM

    I don't see what supports the contention that the unemployment rate is intentional.

    ReplyDelete
  2. @Anon:

    For starters, see The Costs of Illegal Immigration vs. State Budget Deficits: a Chart.

    And then consider how every health insurance company is at risk of imploding thanks to ObamaCare. That means hundreds of thousands of employees' jobs are at risk.

    Now consider the constant fiscal support of unions, quadrupling the deficit, the incessant class warfare, the race-baiting, and so on...

    There will be a quiz later, so study up.

    ReplyDelete
  3. Bones6:46 AM

    The less you can or feel you can produce on your own, the more you want the government to supply. The Democratic party's vote production plan for many years.

    ReplyDelete
  4. Doug, you may find this unemployment rate applet interesting:

    http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

    ReplyDelete