Unemployment Tricks: Jobs Claim Made by 'Shrinking' Workforce

Tuesday, 07 Feb 2012 10:49 AM

By Andrew Henry

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Last week, the White House claimed that unemployment dropped for the fifth consecutive month to 8.3 percent — the lowest it has been in nearly three years — after adding 243,000 jobs, according to the Bureau of Labor Statistics.

But financial experts are saying the figures may have been manipulated — and that the significant drop in employment was because of the fact that the federal agency charged with computing key economic data has significantly decreased the number of Americans in the workforce.

“If you hold the workforce participation rate constant over the past year, unemployment would be about 8.9 percent instead of 8.3 percent,” GOP economist Matt McDonald of Hamilton Place Strategies said Monday on CNBC’s Squawk Box. "So it is a weird number that is out there, and I think people have to be looking at that carefully.”

The same Bureau of Labor Statistics (BLS) report that showed unemployment dropping to 8.3 percent showed total workforce participation — the number of people either working or looking for work — declining by 1.2 million people in one month.

The unemployment rate is determined by dividing the number of unemployed job-seekers by the total labor force. By reducing the number of workers in the overall workforce, the Obama administration can show actual unemployment dropping, when, in fact, improvement has been marginal at best.

Many economists feel the official statistics seriously underestimate how bad the unemployment situation really is. They maintain that the key measure is the number of people who would like to have a job, but can’t find one.

When people retire from the workforce because of the aging of the nation’s population or give up looking for work because of prolonged unemployment, the BLS declares the unemployed person a “discouraged worker.”

At that point, the BLS lists them as “marginally attached to the workforce,” and they no longer are considered to be part of the nation’s working population.

Dropping them off the employment calculations keeps the unemployment rate substantially lower than it would be otherwise and has been key to the improvements in the unemployment numbers during the past year.

Tyler Durden of Zerohedge.com writes: “It appears that the people not in the labor force exploded by an unprecedented record 1.2 million.”

In fact, Zerohedge notes that BLS is breaking records in claims about the shrinking workforce. The most recent unemployment number was based on the assertion that the entire U.S. workforce has shrunk to a 30-year low.

An analysis by Joseph Curl of the Washington Times shows the labor force as a percentage of the available population hit 66 percent in October 1988, and remained there throughout the presidency of George H.W. Bush. It then reached 67 percent or better for 40 straight months during President Bill Clinton’s presidency, and was above 66 percent for virtually all of President George W. Bush’s presidency.

But by the end of President Obama’s first year in office, it had dipped to 64.6 percent, before dipping to just 63.7 percent last month — its lowest point in almost three decades.

One analyst who is stridently critical of the BLS numbers is TrimTabs.com CEO Charles Biderman. His firm uses what he considers a more modern and timely measurement, actual tax receipts to the IRS, to calculate employment.

By his firm’s calculations, the economy added only 44,000 jobs in January, not even enough to keep the unemployment rate from growing.

The BLS numbers "are just guesses,” Biderman tells Newsmax. “I don’t know whether they’re politically motivated or not."

The White House is doing "cartwheels" over the positive jobs numbers being promulgated from the BLS, the Christian Science Monitor says.

"These numbers will go up and down in the coming months, and there's still far too many Americans who need a job or need a job that pays better than the one they have now,” President Obama said. “But the economy is growing stronger.”

BLS spokesman Gary Steinberg tells Newsmax that the bureau publishes its methodologies for calculating the unemployment rate online. While its tweaks its various formulas to keep them up to date, he states there has been no major change in how the rate is calculated in over a decade.

“The definitions have not changed . . . if someone is not actively looking for work for the four weeks preceding the reference week, they’re not in the labor force,” he says. “That was true years ago, and it’s true today.”


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