As our economy continues its nose dive into a depression, and is only being saved by the fact that the rest of the world is worse off then we are, we got another piece of bad news last week, new unemployment numbers. The Labor Department said last week that employers cut a net total of 533,000 jobs in November and the unemployment rate reached 6.7 percent, a 15-year high. While this is another reason to raise alarm, an insightful mind might note that the unemployment rate seems to remain at a relatively benign level of 6.7%. It’s bad that it’s at a 15 year high, but its not that bad because its still below 7% right?
Wrong. Dead Wrong. The 6.7% number is the percentage of the labor force that is receiving unemployment benefits. This is not the actual unemployment rate. The Labor Department classifies unemployed workers in six different categories, u-1 through u-6. The media outlets only report the u-3 number that tallies the percentage of the labor force receiving unemployment benefits. Why doesn’t the media at least mention this fact?
The unemployment rate would have been higher, except that more than 400,000 Americans gave up looking for a new job and weren’t counted in the labor force. The u-6 number counts all members of the labor force that are seeking work, have ceased seeking work, or are unintentionally underemployed. This number for November is 12.5%. And this no doubt does not include a number of individuals who for some reason or another never applied for unemployment benefits.
These type of statistics were not kept back in the 1930’s, but it is estimated that unemployment during the depression was around 20% – 25%. Given that the current rate of unemployment is just starting to feel the effects of the economy’s crash and after the holiday retail season is over will rise even further, it’s not that far fetched to see unemployment in the 15% – 20% range in the near future.
Where does it end? With no jobs, how are we going to pay for the trillion dollar plus bailout? Will Obama’s stimulus package really work? Good luck Mr. President elect!