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David Stanowski
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Real Unemployment
by David Stanowski
15 December 2010

The federal government generates most of the data and statistics used to measure and analyze the economy. This is unfortunate, because politicians are in the business of convincing the public that conditions are better than they seem to be in order to stay in office, so they are constantly "adjusting" the formulas to make the results appear better than they really are.

The statistic that they are most concerned about is unemployment. If the government is forced to acknowledge a high degree of unemployment, the people grow very angry and restless. In today's world, they appease them with unemployment payments and food stamps to eliminate the soup lines of the 1930s, which would play very badly on the evening news.

One of the primary methods to understate unemployment is to change the definition of the labor force to make it artificially smaller than it really is. This is done by altering the criteria used to make it more difficult to qualify. The last major change was in 1994.

John Williams started Shadow Government Statistics in 2004 in effort to correct the "adjustments" in government statistics, and generate more accurate data.

The SGS Alternate Unemployment Rate reflects the current unemployment reporting methodology adjusted for the SGS-estimated number of long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the Bureau of Labor Statistics' broadest measure of unemployment (U-6), which includes short-term discouraged workers, and other marginally-attached workers, as well as those forced to work part-time, because they cannot find full-time employment.

The headline unemployment rate (U-3) (see red line on the graph below) which is the one covered by the media is a much narrower definition than U-6 (see gray line). 

Please note that SGS's Alternate Unemployment Rate (blue line) currently stands at 22.5%! It's easy to see why the government chose to restrict the definition of the labor force. The highest unemployment rate, as it was defined during the 1930's, was 25-26%. How do you think the recent election would have played out with a more accurate official unemployment rate at or above 20%?

SGS Unemployment

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