Fudging of Unemployment Numbers More than a Counting Game

With the announcement last month that the unemployment rate had finally dipped below 9%, there was much excitement that the glad news could spell victory. No, not for the nation over the economic morass we are in, but for the Obama administration and their hopes for a win in the next presidential campaign. Now this is all very nice in its own way I'm sure, but we have to face the hard truth.

As Washington commentator Ed Luce writes in the London Financial Times, "According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent."

As we currently measure it, the unemployment rate is not how many people don't have jobs, but how many people don't have jobs who are actively looking for them. Much of the drop we experienced was caused by people just giving up and dropping out of the labor force. As the Obama Administration measures it, those people don't count anymore.

Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That's millions of workers leaving the workforce, and it's not because they've become sick or old or infirm. It's because they can't find a job, and so they've stopped trying. That's where Luce's calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate -- the apples-to-apples unemployment rate -- is probably 11 percent. And the real un- and underemployed rate -- the so-called "U6" -- is near 20 percent.

Those numbers are a much closer match to the reality most of us are experiencing. Look around you: large numbers of people unemployed, and likely to remain so.

For that I say give credit where credit is due.