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What is The Real Rate of Unemployment in the United States?

Posted by Larry Doyle on August 13, 2010 8:06 AM |

Just what is the true rate of unemployment in our country? Our headline U-3 rate is currently 9.5%. Our U-6 rate, more broadly defined, is 16.5%.

Many people are aware of the differences between U-3 and U-6; however, renowned economist John Williams takes our analysis to an entirely new level. Williams is far ahead of the curve in his work.

William is likely not a regular on the Washington cocktail circuit. Why’s that? He goes far deeper in his work and exposes inconsistencies, if not worse, in government statistics. Let’s learn more about Williams and his work at Shadow Government Statistics:>>>>

Walter J. “John” Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies.

Formally known as Walter J. Williams, my friends call me John. For nearly 30 years, I have been a private consulting economist and, out of necessity, had to become a specialist in government economic reporting.

One of my early clients was a large manufacturer of commercial airplanes, who had developed an econometric model for predicting revenue passenger miles. The level of revenue passenger miles was their primary sales forecasting tool, and the model was heavily dependent on the GNP (now GDP) as reported by the Department of Commerce.

Suddenly, their model stopped working, and they asked me if I could fix it. I realized the GNP numbers were faulty, corrected them for my client (official reporting was similarly revised a couple of years later) and the model worked again, at least for a while, until GNP methodological changes eventually made the underlying data worthless.

That began a lengthy process of exploring the history and nature of economic reporting and in interviewing key people involved in the process from the early days of government reporting through the present.

For a number of years I conducted surveys among business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York Times and Investors Business Daily, considerable coverage in the broadcast media and a joint meeting with representatives of all the government’s statistical agencies. Despite minor changes to the system, government reporting has deteriorated sharply in the last decade or so. (LD’s emphasis)

What does Williams think about the inherent bias and changes in government models and results generated? He is not bashful in asserting:

Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting. (LD’s emphasis)

So then what does Williams view as the true rate of unemployment?

Regrettably, boys and girls, by Williams’ measuring stick, unemployment in our country is currently close to 22%.

What do you think about these relative measures? Whom do you feel truly captures our current economic health? My personal opinion is that our overall economy feels like unemployment is far closer to Williams’ measure than that produced by the Bureau of Labor Statistics.

For those who prefer pictures to words, what does unemployment look like in terms of our changing economy? Thanks to a friend for sharing the following:

As another friend of mine has told me numerous times, “Larry, it is a privilege to work.”

He’s right.

LD

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  • phil trupp

    In the debate about which is more toxic to a nation’s health–deficits v. unemployment–the latter wins hands down. The good news is that the debate has the positive effect of making jobs for specialized economists and statisticians. Unfortunately the conclusions that are derived tend to be incoherent because the variety of mathematical models used; numbers have a way of bumping into each other. It’s a truism that statistics will allow a researcher to prove his or her point, depending on how the numbers are weighted. Still, the bottom line is this: unemployment is far greater than 9.5%; it may be nearing official Great Depression figures–25%. It has been argued that 25% was a “short figure.” In the 1930s we didn’t have the means to make spot-on measurements. Today’s econometrics estimate unemployment in the 1930s closer to 30%.

    FDR, in 1937, hit the wall with job creation. The numbers of unemployed continued to grow, despite infusions of make-work cash by the federal government. If it weren’t for the shock of WW-II, there’s no telling how high the unemployment rate would have gone.

    Today, Washington economists and statisticians appear to agree (as much as can be hoped for between these feuding specialists) that Iraq and Afghanistan serve as our new equivalent of the 1930s WPA. That is a sad and frightening conclusion, and as one who recalls the angst over employment for returning GIs in the 1940s, I’d say the modern comparison is appropriate. What would we do if the Iraq and Afghanistan adventures would shut down for good? Let’s call in the math swamies and the battling economists for an answer.

  • whoisjohngalt

    Some intersting statistics, however, his hyperinflation report was first published in April of 2008. That means he has been wrong for at least 2.5 years. As your leading deflation reader I have seen it much differently for a long time. My accounts have been doing well. I avoided much of the pain in 2008 because I had 40% in long-term treasuries (20+ years) & 20% in money markets. About 1 year ago I shifted the MM into utilities (5% dividends) and RDSA (also high dividend) stock. Both are up since then. On days when utilites crater with the market (usually treasures go up on those days 1%), I transfer some of the long-term to utilities. I also played F from 2 up to about 8.

    My financial situation is great at 59. I could retire now, but will still work maybe 2 more years.

    My advise today, no hyper inflation yet–still deflation or 0 inflation. Be long in utilites & big oil with dividends. Don’t buy growth stocks with no dividends.

    When and if jobs come back, then consider some inflation. Not yet though.

    • ourdad1

      Why is a surprise to anyone there is no one hiring. The fact the rates are too low in itself is a mistake. These companies are refinancing at 1%. At those rates it doesn’t take much in production to make money as they sit. Even a more deciding factor is the fact this administration is not trustworthy. The first thing they had to do once the health less care was cramped down Americans throats was to pay hundreds of millions of dollars. Along with bailouts, the takeover of companies, and the unknown staring everyone in the face keeps companies from hiring or spending or both. A 2200 page finance bill also filled with the unknown from this administration is good for toilet paper. Yeah I know some of you won’t agree there. The way I see it I would have reenacted the Glass Stegal act at least for the time being. to let the same “banks” that brought us to this horrible situation can basically do it again. Banks should be banks and a wire house a wire house period. Some of the very companies you are all PO’d about are brokerage houses and nothing more. Merrill, GS, Wachovia, Lehman, Citi/Smith Barney, Bear, and Lehman were so called banks and look where it led to. You see any of the smaller firms in that mix? No because they were NOT nor did they want to be involved in the derivative markets. We bailed out the bad guys. The bad guys unloaded the crap on us as well as given the funds to pay off both their penalties and their ARS paper. The smaller firms not so much. Of course this is another place you will not agree with me. But it is true and the reason they do not have the money to buy back the paper. I cannot understand why folks cannot see how these larger “banks” were able to pay off their ARS holders. They were broke when Coumo came down on them. They go to the peoples window and get the money to pay their ARS holders. And many of you act like these “banks/brokerage companies” are so wonderful and great and upstanding etc and the smaller firms with no access to the window because they were the ones that would not touch funny paper and therefore did not need bailouts and even if they did would probably not get one. I have said it before and saying it here these companies did not underwrite this paper. All of those I named above did write it. When paper is written it is not uncommon the underwriters company will guarantee all the paper will be placed.They come up with both the legal documents and the marketing. I am concerned for the future of this paper. The companies you are upset with DOES NOT have the money to buy back the paper or they would. I can assure you from the bottom of my heart the brokers have wanted this to be cleared up since 2-16-08. This is a nightmare for everyone. The pressure in my mind should be directed towards the fund companies. As we all know some of them have come up with alternative financing to buy back paper. But PIMCO and BLACK ROCK in particular have shown they have no interest of doing this. There are others but they have much less paper out there. Did you know there are 2 out of 5 members of the board dedicated to the ARS paper. So they can be out voted every time. Go look at the management fees these funds receive and of course add 30, 40% more depending on how much is leveraged and you will find out very quick why PIMCO has no interest in de-leveraging this paper. But I believe this may very well come back to haunt them if all of sudden there is a continuous spike in interest rates. Not only will they climb over the 2/1 they must maintain the fund holders will get screwed big time only due to greed. Look before you reply and rake me over the coals go to one of the closed-end web sites and do look at the management fees and then think about it. After that then yell scream whatever you want. It can no longer hurt. I am one of those that refuses to just sit around and say it will all work out. I do believe that it will but I have and continue to write publications, reporters, Congress men/women and ARS holders. I believe I will eventually find someone that will help and get on top of this. Now wait a second so I can say I wrote this without checking grammar so if it sounds like rambling I apologize. OK Start yelling.

  • John W

    The Ecstasy of Empire

    Paul Craig Roberts
    Infowars.com
    August 16, 2010

    http://www.infowars.com/the-ecstasy-of-empire/

    The only way that the US will again have an economy is by bringing back the offshored jobs. The loss of these jobs impoverished Americans while producing oversized gains for Wall Street, shareholders, and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods and services in China, corporations would have a high tax rate. If value is added to their goods and services in the US, corporations would have a low tax rate.

    This change in corporate taxation would offset the cheap foreign labor that has sucked jobs out of America, and it would rebuild the ladders of upward mobility that made America an opportunity society.

    If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.

    Obviously, the corporations and Wall Street would use their financial power and campaign contributions to block any legislation that would reduce short-term earnings and bonuses by bringing jobs back to America. Americans have no greater enemies than Wall Street and the corporations and their prostitutes in Congress and the White House.

    The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire.

    The United States and the welfare of its 300 million people cannot be restored unless the neocons, Wall Street, the corporations, and their servile slaves in Congress and the White House can be defeated.

    Without a revolution, Americans are history.






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