Summary of the Unemployment Calculation Scam: the Two Biggest Flaws

In the last post, the one titled "More Than Fifteen Million Unemployed Americans are not Recognized or Counted as Unemployed by the U.S. Government" I reported how the U.S. Bureau of Labor Statistics distorts unemployment reporting. Today I set out to find out what the real, true unemployment rate is. In other words, I set out to design my own system. I have made quite a bit of progress, but I do not yet have a publishable system. I am currently having a lot of trouble trying to figure out how to deal with college students and I have a few smaller problems to deal with.

While designing this new system, I have become more convinced than ever that much of what the Bureau of Labor Statistics does with respect to employment and unemployment counting is pure garbage. Specifically and especially, the "Current Population Survey," from which all of the unemployment rates are calculated, is total garbage. It is complete and total garbage and is useless with respect to measuring employment and unemployment.

The other main BLS survey, the Current Employment Statistics, is a survey of employers and is nowhere near as flawed as is the Current Population Survey. One problem with the Current Employment Statistics, however, is that agricultural employment is totally ignored. And there are a few other relatively minor flaws but on the whole its a good product. But never forget, Current Employment Statistics is NOT used in any way to determine unemployment rates, so the fact that it is nowhere near as flawed as the other survey is not all that relevant.

Notice that stock market investors react to the number of jobs gained or lost coming out of the Current Employment Statistics and they generally ignore the “official unemployment rate” coming out of the Current Population Survey. Investors do this because they long ago realized that the Current Population Survey and the official unemployment rate are largely garbage.

I gave many and hopefully most of the reasons these are garbage in that previous posting. But I thought it would be useful to emphasize the two biggest flaws of all in what BLS does, to in other words summarize the last, much longer posting.

THE FIRST OF THE TWO BIGGEST FLAWS
The first of the two biggest flaws of all is that BLS assumes that people who are not looking for a job do not want a job. These people are pigeonholed into the Orwellian world of "not in the labor force". BLS is living in a fantasy world, because there are tens of millions who would like a job but who never look for a job except maybe once in a blue moon.

Strange as it may sound, some of them wait for someone to more or less come looking for them with a job (a friend, a former associate, a family member, etc.) which happens more often than most would think.

But for the majority of those who never (or almost never) look for a job, it’s a matter of simple microeconomics. Looking for a job costs money that many millions of people do not have. If you don't make certain job hunting expenditures than you almost certainly will not get a job, period. To look for a job you need money for transportation, you need money for clothes, you need money for producing resumes, you need money to get on the computer for research, and so on and so forth. If there are almost certainly (or definitely as the case may actually be) no jobs for a particular person, than any time and money at all spent looking for a job is 100% wasted. Obviously, if someone doesn't have a job, he or she may have so little money to begin with that wasting even a very small amount of money is going to create a lot more hardship than already exists.

Also, it should be realized that roughly half of the employed population has either never looked for a job or has spent only a small number of days or weeks looking for a job during a working lifetime. But now with the advent of the 2nd Depression, unemployed people are apparently expected to spend months and even years in the unpaid job of "looking for a job". Something doesn't seem quite right about that. A career in "looking for a job" at no pay seems just a little unfair even by American standards if you know what I am saying. Increasing millions are saying "no way" to the total insanity and to the gross unfairness of months and years of unpaid work "looking for a job".

U6 IS A (SMALLER) SCAM
For those who think that the U6 unemployment measure (the one that includes "discouraged workers," but only some of them actually) absolves BLS of being to blame for a misleading and useless unemployment calculation, consider:

(a) Someone is counted as unemployed under U6 only if they have looked for a job within the last year. But there are increasing millions who have been too discouraged and/or too poor to look for work for longer than one year.

(b) U6 is not promoted as the official or real unemployment rate, U3 is. Few people other than economists and policy wonks know about U6 and U6 is rarely if ever reported in the mainstream media. The common man has no idea what U6 is.

(c) U6 counts self employed people who make little money or who lose money as employed as do all of the other measurements (U1, U2, U3, U4, and U5) which leads us to....

THE SECOND OF THE BIGGEST TWO FLAWS
The second of the two biggest flaws is that BLS assumes that anyone self employed is employed. Let me emphasize, its NOT that the self employed are considered to be not in the labor force (which arguably could be partially justified.) It's that they are considered to be employed that puts BLS in that fantasy world again. They are employed whether they make any money or not. They are considered employed even if they lose money!

In the real world, someone is employed only if someone is working AND making money. Those who are self employed but who are making less than about 1.5 times the poverty line per year should be classified as unemployed. Moreover, by rights anyone who is "working" but not making at least above the poverty line (or better yet 1.5 times the poverty line) should be classified as unemployed.

The previous post was wonkish (but very accurate if I do say so myself, laugh out loud). This one sums up the Bureau of Labor Statistics scam more concisely. As I said in the prior post, the list of types of people who are unemployed but are not counted as unemployed seems to go on and on and on.

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