Jobenomics tracks both employment (see: Employment Scoreboard: April 2012) and unemployment (this posting).  Highlights of this posting:

• The downward trend in the US working population and the upward trend in the US non-working population pose a serious threat to America’s economy and way-of-life.  Unfortunately, the vast majority of Americans are not aware of these trends.
• If the “official unemployment rate” was adjusted for discouraged workers joining the Not-in-Labor-Force unemployment category, the official unemployment rate would be 9.4% as opposed to 8.2%, which is currently being heralded as a “significant sign” of economy recovery.
• If all the underemployed, unemployed and Not-in-Labor-Force people were calculated as “functionally unemployed”, the US unemployment rate would be 35%.

Every month, the Bureau of Labor Statistics (BLS) publishes unemployment and employment statistics for economic, policy and public decision-making. Unfortunately, few policy-makers, opinion-leaders, media-pundits and citizens understand these statistics.  More importantly, Americans tend to “dumb down” the numbers to one statistic—the U3 rate or “official unemployment rate”.  Jobenomics believes that a basic understanding of unemployment and employment statistics, rates and numbers is essential to good governance, which is the reason that these scoreboards are updated and posted monthly.

The Bureau of Labor Statistics uses the terms “unemployed” and “employed” to describe what Jobenomics calls the Working Population which represents less than a half of the US population.   The majority of Americans who cannot or will not work are in a group that Jobenomics calls the Non-Working Population.   A glass half-full analogy may provide a useful framework to describe the Working Population as contrasted to the Non-Working Population.

According to the Bureau of Labor Statistics (BLS) the basic concepts involved in identifying the employed and unemployed are quite simple:

• People with jobs are Employed.
• People who are jobless, looking for jobs, and available for work are Unemployed and those who are marginally employed are deemed Underemployed.
• People who are neither employed nor unemployed are not in the labor force.   Those who have no job and are not looking for one—are counted in the Not-in-Labor-Force.

These three categories comprise the “civilian noninstitutional population”[1], which equates to 242,604,000 people as of 1 April 2012.  Since the total US population is 313,319,000 (US Census Bureau data[2]), there are 70,715,000 children, elderly, disabled, serving in the military, incarcerated, etc. who are not counted in the BLS’ civilian noninstitutional population.  These uncounted 70 million are in a category named All Others by Jobenomics.

Therefore, from a Jobenomics perspective:

• Working Population = Employed + Underemployed + Unemployed = 154.7 million.
• Non-Working Population = Not-in-Labor-Force + All Others = 158.6 million.

As shown on the graphic, 154.7 million are in the Working Population, which includes 132.3 million employed and 22.4 million people who have a marginal job, no job or are looking for work.  The BLS calls this group, the “Civilian Labor Force”, which is defined as citizens, who have jobs or are seeking a job, are at least 16 years old, are not serving in the military and are not institutionalized.

The 158.6 million in the Non-Working Population include 87.9 million Not-in-Labor-Force and 70.7 million others not included in the labor force (i.e., the difference between the total population and the BLS’ civilian noninstitutional population).  Those who have no job and are not looking for one are counted by the BLS as Not-in-Labor-Force.  Many who are not in the labor force are going to school or are retired.  However, many more have simply quit looking and are living at home, occupied with illegal pursuits, or on welfare.  To truly understand the magnitude of the unemployment problem, America needs deeper insight into the vagaries of its non-working population that now represents more than half of all Americans.

The downward trend in the US working population and the upward trend in the US non-working population pose a serious threat to America’s economy and way-of-life.  These trends are shown in the following two graphs.

Over the last three decades the number of people working as a percentage of the working population (civilian noninstitutional population) increased steadily to a peak in year 2000 as shown above.  After year 2000, the US working population suffered a serious decline.   While the Great Recession in 2008/09 exacerbated the situation, the decline started in the millennium’s boom years. Correspondingly, those in the Not-in-Labor-Force category have grown consistently since year 2000.  Since 2000, this category grew by almost 20 million people.  Since 2010, it grew over 4 million people. When a discouraged worker quits looking for work, he/she is eventually moved into the Not-in-Labor-Force category—which essentially means that this former worker is in limbo and off-the-grid from a working population perspective.  From a Jobenomics perspective, Not-in-Labor-Force citizens should be classified as long-term unemployed.

If all underemployed, unemployed and Not in Labor Force people were calculated as “functionally unemployed”, the US unemployment rate would be a a staggering 35%. 

The Bureau of Labor Statistics (BLS) calculates six unemployment categories (U1 through U6) every month.  The three most often reported categories are the so called Long-Term U1 Rate, the Official Unemployment U3 Rate, and the Total Unemployment U6 Rate.

As of 1 April 2012, the U1/U3/U6 rates equated to 4.6%/8.2%/14.5% or 7.1/12.7/22.4 million people respectively.   These rates and numbers are calculated as a percentage of the US Civilian Labor Force, which currently stands at 154.7 million Americans, which is less than half of all Americans.  The Jobenomics “functionally unemployed rate” equates to 35% of the US population or 110.3 million people.   110.3 million is calculated by adding the BLS’ U6 number (22.4 million) and the BLS’ Not-in-Labor-Force number (87.9 million).   Dividing 110.3 million by the total US population of 313.3 million yields a functionally unemployed rate of 35%.

Understanding the functionally unemployed rate of 35% is a much better indicator of economic distress, than the much lower numbers indicated by the U3 “official” unemployment rate that is most often watched and reported.

In March 2012 the U3 Rate was 8.2% — 0.8% lower than the September 2011 rate of 9.0%.  Each consecutive month, these incremental drops made headlines around the world as signs of US economic recovery.  However, buried in the newsprint, millions of Americans were reported to have “simply quit looking for work”.  Where did these people go? As discussed earlier, they went to Not-in-Labor-Force limbo.

The table above is derived from the US Bureau of Labor Statistics, Table A-1, Employment Status of the Civilian Population.  It shows from September 2011 through March 2012 the official unemployment rate (U3) dropped from 9.0% to 8.2%, which equates to a decline of 1,224,000 people.  However, the table also shows that 1,830,000 people joined the Not-in-Labor-Force category over the same period of time—an increase of 606,000.

If the “official unemployment rate” was adjusted for these 606,000 workers joining the Not-in-Labor-Force, the official unemployment rate would be 9.4% as opposed to 8.2%, which is currently being heralded as a “significant sign” of economy recovery. 

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