America's Workforce Ghosts

As a former Communications Manager for a Fortune 100 corporation and an active stock trader, my life has been immersed in statistical analysis. For that reason, it's no wonder that I get totally frustrated with how the employment rate is being reported each month. At the heart of that frustration is the reported size of our workforce. Since 2008, the workforce has stopped growing. It's as if, 15 or 20 years ago, Americans stopped having children because they knew their kids wouldn't have jobs waiting for them in 2008 and beyond. Obviously, that's absurd. But, not to the people who calculate the size of the workforce and unemployment rate each month: The Bureau of Labor and Statistics (BLS).

In essence, the workforce has remained at or below approximately 154 million workers since 2008. Yet, if we assume population growth, the current workforce should be above 160 million workers with more than 162 million by the end 2012. Instead, the BLS has arbitrarily created a bunch of "ghost" workers who don't exist and who are not being included in their monthly unemployment calculations. As a result, we are seeing a declining unemployment rate when, in fact, it has actually increased. To prove this I present the following chart:


While I have calculated that the "true" unemployment rate as being over 13%, the number might be a little lower if I had been able to determine how many unemployed workers were able to take early pensions and, as a result, may never return to the workforce. Even so, the current rate is a politically advantageous distortion of the unemployment situation in this country which works nicely towards the reelection bid of Barack Obama. Sadly, the truth is not being told.

Striking Verizon Workers Were Counted As Unemployed???

According to the FAQ (Frequently Asked Questions) at the Bureau of Labor and Statistics (BLS) own website, workers involved in an "industrial dispute" -- a strike -- are counted as being employed and should never appear in any section of the Monthly Unemployment Report as being unemployed. Here's the actual text from the pertinent BLS FAQ:

"Who is counted as employed?

Not all of the wide range of job situations in the American economy fit neatly into a given category. For example, people are considered employed if they did any work at all for pay or profit during the survey week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Persons also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:

On vacation
Ill
Experiencing child-care problems
Taking care of some other family or personal obligation
On maternity or paternity leave
Involved in an industrial dispute
Prevented from working by bad weather"

Yet, in this morning's Employment Report, 45,000 striking Verizon workers were tallied in the unemployment stats for "Information Technology" workers and, then, were rolled up into the final count; reflecting zero jobs being gained for the month. This fact was duly noted in the first paragraph of this morning's BLS news release, when it was stated: "a decline in information employment reflected a strike". (Click here to see the actual BLS new release) However, if the striking workers were properly counted as being employed, there should have been a job growth of 45,000 jobs for the month instead of the reported zero.

So, what gives? Are striking workers now suddenly being included as part of the unemployment stats when they have never been counted this way in the past? Was the inclusion of the striking Verizon workers a convenient way of making this report look worse than it really was in order to help Obama get support for his jobs speech and plan of next week? Something really stinks on ice with this one! After all, the BLS is a government agency that reports to Obama through the Secretary of Labor and, I wouldn't put it passed that agency to tweak the numbers for the greatest possible political leverage. Then, next month, the BLS will just correct the problem with one of their many and constant statistical "revisions". In the meantime, we just might be seeing another one of Obama's deceitful manipulations of the facts.

Now, I'm Really Smelling a Rat!

Following the announcement of last month's unemployment rate of 8.5 percent , I questioned the accuracy of that number in my blog entry titled "Some Fuzzy Math On Unemployment". The Obama agency that released that number was the Bureau of Labor and Statistics (BLS). The announced 8.5 percent conveniently "matched" what Obama's economic team was predicting as a high for 2009. How intuitive!

Shortly after the release of the national number, it is normal for the BLS to release the state information for the same period. This data is now available at Wikipedia (Click To See Data).

Conveniently, that report doesn't provide any foot and crossfooting computations of the state numbers that one would expect from an agency that has the word "statistics" in their name. So I did just that; and I came up with this report that includes some extended data that could either disprove or prove the accuracy of their national report (Click to View My Revised Report).

In each state's case, I plugged in the population of that state* and, then, based on the unemployment rate, I extracted the proportional number* of the unemployed for each state. Then, I footed all that data by totaling the population all the unemployed; and, then, calculated the overall rate of unemployment.

So, guess what? When I did all that, I got an unemployment rate of 8.8% which is closer to the 8.7 percent that I thought was the real rate was and a number that is three tenths of a percent higher than the 8.5 percent the BLS announced.

While I might be wrong due to some rounding errors, I don't think I can be off by more than 1/10th of a percent. I thought this was interesting.

*Note: Actual unemployment rates are calculated on the basis of "available workforce" and not pure population numbers. So, using my form of calculation, the overall unemployment number of 26 million who are out of work is too high of a number because it includes portions of the population who are not part of the workforce; such as children, retirees, handicapped, etc. Furthermore, there are individual states who have higher or lower workforces based on the amount of retirees and children in their population's mix. For sure, a retirement state like Florida has an "unemployed" number by me that is greatly overstated. Offsetting that would be a state like Michigan were retirees have a tendency to move away in their later years. However, the bottom line of 8.8 percent should be very accurate because it was extracted on a "proportional basis" and it smooths out the workforce variances by state.