The Bureau of Labor Statistics (BLS) surveys 110,000 people every month to represent 240 Million workers who are employable, and using this sample, the BLS unemployment rate was reported as of March 2012 at 8.2%, a slight improvement over the previous months.
Why There can be difference between real and reported numbers?
For this, let us look at the different measurements utilized by the BLS, known as U-3 through U-6 :
- U-3 : considered the official unemployment rate and the one cited in the March report, it calculates the number of unemployed actively seeking employment.
- U-4 : U-3 plus discouraged workers, standing at 8.9% in January.
- U-5 : U-4 plus persons marginally attached to employment, who are not counted as unemployed since they did not actively seek employment during the last four weeks, at 9.9% in January.
- U-6 : all of the above plus part time workers who would have preferred full time employment, at 15.1% in January and 14.5% in April.
It is U-6 that former Labor Secretary Elaine Chao focuses on, as she also cited another very disturbing fact, a 24% unemployment rate among the young, a number not far from the 25% rate experienced in the 1930s during the Great Depression.
In April 2012, the BLS reported a further drop to 8.1%, even as an additional 522,000 people were no longer part of the work force, for a whopping total of 88,419,000, the highest ever on record. The drop in the unemployment rate was facilitated by a labor participation rate that dipped to a 30 year low of 64.3%. However, the BLS conceded in its footnotes that it was only 90% certain that between 15,000 and 215,000 new jobs were created during the month, not the 115,000 widely cited in news reports.
The Congressional Budget Outlook for 2012-2022 estimates the real unemployment numbers of 2012 to be 10%. Why are they increasing? Sadly, there is no economic factor on the immediate horizon that will have a positive impact on the unemployment rate.
To be fair, the BLS unemployment rate has been on a downward trend for the past few months, however slightly, but the drop applies to all measurement methods, U-3 through U-6.
It was not that long ago that the U.S. used to ridicule Europe with its 8% unemployment rate. Well, the U.S. has been stagnating at that level for some time now, and the most bullish assessment of the real unemployment numbers of 2012 weighs in at 7.7% by December from Dean Maki, an economist at Barclay’s.