In the packet is the new map of Pennsylvania's Congressional districts. Redistricting and reapportionment reduced the number from 19 to 18. The old Altmire 4th district was folded into the Critz 12th. The 19th district has been renamed the 4th.1
My main topic for this evening asks whether the unemployment rate has actually dropped to 8.1 percent. Many think this is a statistical mirage. The reported unemployment rate doesn't include workers who have given up looking for a job. There perhaps has been no significant increase in the number working. Rather the lower rate reflects an undercounting of the unemployed.
The Bureau of Labor Statistics measures six alternate aspects of unemployment, U1 through U6.2 The statistic reported each month is called "U3". It basically indicates the number of people out of work but who are actively looking.
In the packet is the FOXBusiness article, Lies, Damned Lies and Government Jobs Data by Elizabeth MacDonald.3 The title indicates she thinks the 8% number is more like a lie than a fact. The government doesn't count the 6.3 million who have stopped looking for work. And that number has grown from 5.7 million since January 2009.
Supposedly, unemployment hit a peak of 10% in October 2009. The economist Peter Morici says, in fact, "some 80% of the reduction" in the U3 rate, "has been from adults quitting the labor force." Morici states, "if you factor back in those who've stopped looking for work but would re-enter if there were jobs, as well as part-time workers who would prefer full-time positions", the unemployment rate rises to 14.5 percent. The Bureau of Labor Statistics calls this "U6".
The Obama administration touts the lower U3 unemployment as proof of an economic turnaround. But MacDonald asks "Since when does a nation's labor force shrink during a recovery?" It should not shrink, it should grow.
This brings us to the final item in the packet. The graphical analysis here is by Tyler Durden at ZeroHedge.com. It illustrates that a truer measure of U3 requires a more realistic measure of the potential labor force.4
An unrealistically low labor force participation rate undercounts the size of the labor force. If the total labor force is undercounted, then the number of unemployed is also undercounted. This artificially lowers the reported unemployment rate. A more realistic labor participation rate would be the average since 1980. The greater size thereby measured for the potential labor force implies the calculation of higher unemployment.
As of December 2011, the implied unemployment rate was calculated at 11.4%. This differed from an official, reported rate of 8.5%. The implied rate has been trending slightly up, while the reported rate has been trending down. In the packet, an update of this analysis is shown. As of May 2012, the implied U3 unemployment is at 11.6% as compared with a reported rate of 8.1%.5
Recent headlines indicate the unemployed are being undercounted. The public is catching on that the actual unemployment is, in fact, higher than reported.6
In conclusion, I hope this brings some clarity to some confusing employment statistics. I have tried to illustrate here what is not so well understood: the unemployment situation in the country is more than likely getting worse.
The 8% rate that Obama has been touting, is more like propaganda, than truth.
Thank you
-- Peter Cooper