Submitted by Tyler Durden on 01/06/2012 10:23 -0500
One does not need to be a rocket scientist to
grasp the fudging the BLS has been doing every month for years now in
order to bring the unemployment rate lower: the BLS constantly lowers
the labor force participation rate as more and more people "drop out" of
the labor force for one reason or another.
While there is some floating
speculation that this is due to early retirement, this is completely
counterfactual when one also considers the overall rise in the general
civilian non institutional population. In order to back out this fudge
we are redoing an analysis we did first back in August 2010, which shows
what the real unemployment rate would be using a realistic labor force
participation rate. To get that we used the average rate since 1980, or
ever since the great moderation began. As it happens, this long-term
average is 65.8% (chart 1). We then apply this participation rate to the
civilian noninstitutional population to get what an "implied" labor
force number is, and additionally calculate the implied unemployed using
this more realistic labor force. We then show the difference between
the reported and implied unemployed (chart 2). Finally, we calculate the
jobless rate using this new implied data.
It won't surprise
anyone that as of December, the real implied unemployment rate was 11.4%
(final chart) - basically where it has been ever since 2009 - and
at 2.9% delta to reported, represents the widest divergence to reported
data since the early 1980s. And because we know this will be the next
question, extending this
lunacy, America will officially have no unemployed, when the Labor Force
Participation rate hits 58.5%, which should be just before the
presidential election.
Labor Force Participation since 1980:
Reported and Implied number of Unemployed:
Difference between Reported and implied unemployment rate:
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