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March 5, 2011
The phony drop in unemployment
The Bureau of Labor Statistics has again issued data that appears to contradict what the average American sees in his neighborhood and instinctively questions. The official unemployment rate of 8.9% is a factor of data input which reflects how many people are looking for work, how many ceased to do so, and an estimated size of the current labor force.
However there is a statistic the BLS puts out that does cast a more accurate shadow on the labor situation.
That is the Civilian Labor Force Participation Rate -- which is essentially the ratio of the labor force as compared to the total working age (over 16) population. In November 2008, when Obama was elected that ratio was 65.5%. In February 2011 it is 64.2%.
The primary reason for this drop is the reduction in the size of the labor force as calculated by the BLS. In February 2011 this force was estimated to be 153 million and the total working age population of 239 million.
In November of 2008 the labor force was 154.6 million and the total working age population 234.5 million.
Per the BLS, while the working age population increased by 4.5 million, their estimate of the size of the labor force decreased by 1.6 million. It is an obviously impossibility to say that at least an historical 65% of the entire increase in the working age population plus another 1.6 million people are not a part of the labor force.
Had the participation rate remained the same as in November of 2008 in February of 2011 then the labor force would have been 156.5 million not 153 million and the unemployment rate would be 10.8% not 8.9%. The BLS has in essence dropped over 3.5 million people from the labor force in their calculation of the unemployment rate.
The true labor situation is what the American people see in their towns and cities, not what the BLS, due to its constraints and political pressure are putting out.