The Real Unemployment Statistics, or what the government doesn’t want you to know about the economy

What I’m going to say here will seem to go against everything you’ve heard in the media and from the government for the past several years on the state of the economy.  If you actually read through this you’re either going to dismiss it as foolish and misinformed, or, I hope, search out my references and confirm for yourself what I’ve been tracking for years, but haven’t bothered to write about until now.

Fair warning, this is probably going to be one of my driest posts yet.   If you read on you will be subjected to graphs, charts and data and other material that will seem like it came from that ECON201 class you hated so much in college.  I’ll try to keep it to graphs, and pictures rather than tables of data so this is a little more entertaining, but bear with me.  This is tedious stuff that only an economist or someone suffering from sleep deprivation and insomnia would look at.  And I think that’s why, when you read my findings, the government thinks they can get away with this.

For those of you who don't want to read the entire post, here's the punchline

Executive Summary

Since May 2009 the BLS has consistently and significantly understated the true U-3 unemployment by at least 3% versus what it should be, this gap has increased by about 1% since about September 2010 to almost 4% and appears to be increasing.

Employment Improves Dramatically! 

Economy on its way to recovery

Much has been made of the improvement in state of employment over the past several months.  Headlines reporting the dip in unemployment have driven up the markets, Democrats have patted each other on the back for turning the tide, Republicans have gnashed their teeth, wondering if the economy will continue to turn for the better prior to fall elections.  But has it really?  This is a tremendously important issue because, these data (the Unemployment 3 or U3 report issued by Bureau of Labor Statistics) is the benchmark whereby the government policy makers, Congress, markets and industry gauge the health and prospects of the economy. 

Friday (February 17^th) the financial markets (Dow Jones Industrial Average (DJIA)) closed close to a bellwether mark – 13,000, up 2,400 points in the last 4 months, returning to levels last seen before the 2008 crash.  (The LA Times: Dow nears psychological milestone: 13,000)

A major driver of this enormous gain has been euphoria over the unemployment situation.   But what if unemployment gains have really been more modest that reported?  What would the markets have done?  And more importantly , what will happen once they discover their mistake? 

On a personal note, can your 401(k) take another hit like it did in 2008?  Hmmm.  Let’s take a closer look

Labor Statistics, or (yawn) I forgot my homework at home professor

Using “seasonally adjusted data,” the Bureau of Labor Statistics (BLS) tracks and reports on labor statistics.  It’s the primary source of labor information for government policy makers, economists, investors, and political wonks who want to twist information to say whatever their preconceived notions (be they left or right) tell them they should say.

On February 3, 2012 the BLS reported that:

 “Nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent. Job growth was widespread, with large gains in professional and business services, leisure and hospitality, and manufacturing.  Government employment changed little over the month.”

 http://www.bls.gov/news.release/pdf/empsit.pdf

An impressive result, bringing unemployment down to its lowest level since it peaked in October 2009 at 10.0%, and yet still 3% higher than when President Obama took office in January 2008 (5.0%).  Or was it?

To understand this we need to do a little math and follow how the BLS calculates unemployment.  The data I’ll be using for this discussion are the “seasonally adjusted data” which are the data the BLS uses for its reports.  Basically they look at labor force seasonality (say lots of temporary employment around Christmas as retailers hire temporary workers to work the shops and then cut them after, in the summer, when agriculture employs migrant, oops, I meant to say temporary laborers to harvest the field and so forth) and adjust (read “tweak”) the numbers to avoid noisy fluctuations in the numbers. 

While the impact is of making this seasonal adjustment is significant, these are the numbers they use, and the numbers the market reacts to.  For example in January 2008 the seasonally adjusted population was 154,075,000 and the unadjusted population 152,858,000, or a  .8% increase in the denominator of the unemployment calculation (but I get ahead of myself).

So, on to understanding what the numbers tell us.

Total Population

The BLS defines the Total Population as “the sum of employed and unemployed persons. The labor force participation rate is the labor force as a percent of the civilian noninstitutional population.”  Hmmm.  What does that mean?  Well, they remove from consideration people living outside the country,  disabled, or either too young or too old to work.

In February 2012, the BLS reported the Total Population as 242,269,000, which means that about 70 million Americans are not part of the BLS statistics.  This is the first interesting place the data start to unravel.  As the economy worsens, people’s retirement programs disappear, costs increase beyond Social Security payments, increasingly the elderly are returning to work.  So you have to question any methodology that unilaterally excludes the aged from the base population.

Working Population

This is, well, what it says.  The BLS defines Percent of Population working as those individuals who are “active in the labor market”.  These are people who are either working full-time jobs, part-time jobs, or out of work and actively seeking employment with certain exclusions including workers who have just given up looking for a job (disaffected labor).  (We’ll speak more on this later on)  The BLS defines Working Population as the civilian, noninstitutional population, excluding military, and those incarcerated or otherwise institutionalized.    (See my footnote at the end of this entry about incarceration in the United States, and its impact on Labor Statistics.)  For February 2012 the BLS reported the Seasonally Adjusted Working Population of 154,395,000.

Working Population Percentage

This is used to report what is essentially the percent of the civilian workforce that is working or actively seeking employment.  It’s calculated as

Working Population (Seasonally Adjusted) / Total Population

For January 2012 the Seasonally Adjusted Working Population Percentage was 63.73% (154,395,000 / 242,269,000).

Whoa, this is a little much

Let’s stop here for a second and take a breather.  Let’s look at what these two numbers look like over the last ten years based on BLS data (for all the graphs and figures see the BLS website where you can download the source data and play with it to your hearts content.)

In January 2002 the BLS reported the Total Population as 216,506,000 and the seasonally adjusted Working Population as 143,883,000.  Let’s us this as the starting point (set both to 0) and look at how they grew or shrank over the last decade:

Here we can see that the Total Working Population grew by about 25 Million in the last decade, while the Seasonally Adjusted Workforce grew by about 10 Million, basically leveling off in the summer of 2007, about a year before the market crash of 2008.  Hmmm.  What’s up with that?  Have we had a massive egress from the US?  Are there 15 Million more people in the military or in prison?  No.  This means that a large number of normally employable people have permanently left the workforce. 

Let’s look a little closer.

Let’s say (for lack of a better starting point) that January 2002 represents the “normal” full participation in the workforce.  What would that be? 

Working Population (Seasonally Adjusted) / Total Population =

                        143,883,000 / 216,506,000 = 66.46%

So basically, all other things being equal, there hasn’t been a tremendous change in the total number of people that COULD be working.  Sound like a reasonable assumption?  OK, then let’s look at what the above graph would look like of we kept the workforce at that rate.

If you follow the purple line in the chart above, then you can see that about 6.6 million people have left the active workforce in the last 10 years.  Wow.  Let’s put this in perspective .

How is unemployment calculated?

This calculation is relatively simple.  BLS defines the U-3 rate (people with full time jobs) as one minus the seasonally adjusted number of people employed divided by the seasonally adjusted working population.   (Note – I won’t address the other factors of a weak labor market this the government reports as U-4 through U-6 as this topic has been addressed extensively by places such as the Economic Policy Institute.

So for January 2012 a the BLS reported:

(1 – (141,637,000 / 154,395,000)) = 1 - .9174 = 8.26%, which they report as 8.3%.

What’s the impact of all those people who “left the workforce?”

Well, these are people, who would normally be working, yet somehow have been excluded from the numbers.  To consider them, you’d have to add them back into the denominator (the working population).  What would that do?  In January 2012 the impact of this factor is about 6,609,000, which would increase the working population to 161,004,000. 

So what’s the unemployment rate if we incorporate these 6 Million people back into the equation?

              (1 – (141,637,000 / 161,004,000) = 1 - .8797 = 12.03%.

Holy Crap!  Unemployment (U-3) is really about 4% higher than the government is reporting it!

Let’s look at how this trends over time versus reported unemployment once again setting January 2002 to zero:

Key Takeaway 

Here you can see that since May 2009 the BLS has consistently and significantly understated the true U-3 unemployment (the red line) by at least 3% versus what it should be (the blue line), and that the gap is between these two calculations has  increased by about 1% since about September 2010 and appears to be increasing.

Wow.

What I have to ask is why is no one reporting on this?  Neither the liberals or the conservatives seem to have picked up on it. 

I’m not surprised you don’t hear about this in the mainstream media – hey, it’s hard work to explain this, even harder to understand.  It took me about 2 hours to analyze the BLS data and create the graphs you’re looking at and another 4 hours to write this.  But you’d think that policy makers or Wall Street traders or bankers would be seeing this and screaming bloody blue murder.

But they’re not.

Hmmm.  Perhaps that’s a topic for another day, but I grow weary and you’ve probably lost interest.

If you made it this far, congratulations!

Until next time – If you’re not pissed off, then you haven’t been paying attention.

Incarceration in the United States, an aside

 In 2009 (the latest date for which data are available from the Bureau of  Justice Statistics), there were 2,284,900 prisoners in federal prisons and state jails. 

Source: http://bjs.ojp.usdoj.gov/content/pub/pdf/cpus09.pdf

The US Census estimate for 2009 was 305,529,237 (US News and World Report), which puts the US incarceration rate at about 0.75%  For 2011, provided the rate remained constant, this would have meant about 2.3 million Americans would have been in prison or jail.  To put this in context, the US has about 4 times the average global rate of incarceration, putting us at the highest rate in the world.  (See The National Council on Crime and Delinquency)

Once again We’re Number One! Go USA.

Contraceptives and Clerics don't mix, or why letting a pack of pedophiles set public health policy doesn't make sense

There's been a lot of controversy around contraceptive care and government mandated coverage for women in the past week or so. 

The Catholic Bishops' demand, as a "compromise to the Administration's proposals" is to remove any requirement for contraceptive coverage for all Americans and from all Insurance companies as discriminating against their religious freedoms. They say that to not do so is to discriminate against Roman Catholics.


Fine. I hereby propose that we should, as a "freedom of religion" based nation, ensure parity amongst religions on this issue.


First, in following the Church of Scientology's faith basis, all surgeries, and pharmaceutical coverage must be eliminated as violating their faith base. No longer will their faith be sullied by knowing that their followers are exposed to the potential of having their surgeries or drugs covered to address maladies, and the rest of us will follow suit to avoid any semblance  of persecution.  God will look after them and us. 


Second, no male doctor shall be able to collect for services rendered to a female patient in keeping with Islamic faith basis - we wouldn't want to violate their tenants would we? It would be discriminatory.


You can build upon this list ad nauseum but I think you get the point.

This is what happens when a secular society panders to clerics of a faith base - we get the Taliban in action. Studies show that 98% of Catholic women use contraceptives at some point in their lives - is this yet another case of misogynistic policies imposed on women by (in here) pedophiliac clerics? Even their own followers don't follow this policy, why would we impose it on the rest of Americans?

Please, stop this ridiculous return to the middle ages here in the US and get on to the real business of providing quality healthcare, at a reasonable cost, to all Americans.

Warrantless GPS Tracking - Constitutional violation or Law Enforcement need?

A recent exchange of views between myself and Senator Feinstein (D - California).  

I asked for Senator Feinstein's  commitment to support a bill that would require warrants to track GPS information from any device (such as your smart phone).


The NSA and law enforcement officials now can, and probably do, track every GPS signal in the US, store it in their data centers in Texas, Georgia and Ft Meade, using it to mine every American Citizen movements and activities, coupled with their banking information, their email information and every phone call they make on any number.  Yes, this means everything you do is subject to governmental tracking and scrutiny.


I believe that any freedom loving American would see the absolute Orwellian prospect of the Government legally tracking all our activities.  The fact that they already do, justifying it through a number of Executive orders and poorly thought out legislation (for example the hastily passed, and patently unconstitutional PATRIOT act which is anything but), and that they hide behind secret courts (FISA or the Foreign Intelligence Surveillance Court) is scary to say the least.


Let's see what Senator Feinstein has to say on the issue:


Senator Feinstein's Statement

From: <senator@feinstein.senate.gov>
Date: Thu, 9 Feb 2012 10:32:33 -0500
To: Andrew Nygard <>
Subject: U.S. Senator Dianne Feinstein responding to your message

Dear Mr. Nygard:

Thank you for your letter expressing your support for the "Geolocational Privacy and Surveillance Act" (S. 1212).  I appreciate hearing your views, and I welcome the opportunity to respond. 

In recent years, there have been a number of technological advances that make geolocational information easier to obtain.  It is not just global positioning systems (GPS) that provide this type of information for travelers, cell phones and other communication devices can also reveal the location of their users.  The increasing availability of geolocational information has also become an important crime fighting tool for law enforcement.

On June 15, 2011, Senator Ron Wyden (D-OR) introduced the Geolocational Privacy and Surveillance Act.  This legislation would modify federal law concerning the interception and disclosure of geolocational information, including requiring law enforcement to obtain a warrant in order to access this type of information from mobile telephones, GPS technologies, and other types of wireless communication devices.  It has been referred to the Senate Judiciary Committee, of which I am a member. 

I appreciate hearing your thoughts on the Geolocational Privacy and Surveillance Act.  Please know that I support ensuring that Americans' constitutional rights are appropriately safeguarded, while giving law enforcement officials the tools they need to keep us safe and ensuring sufficient sharing of information for security purposes.  Be assured that I will keep your comments in mind should I have the chance to consider this legislation in the future.

Again, thank you for writing.  I hope that you will continue to write on matters that are of importance to you.  If you have any additional comments or questions, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841, or visit my website at http://feinstein.senate.gov.

Sincerely yours,


  Dianne Feinstein
         United States Senator
Further information about my position on issues of concern to California and the nation are available at my website, Feinstein.senate.gov.  You can also receive electronic e-mail updates by subscribing to my e-mail list. Click here to sign up.  And please visit my YouTube, Facebook and Twitter for more ways to communicate with me.


Thoughts

So this is a scary response from the senior Senator from California.  I've highlighted in red above the scary part - we need to balance the constitutional rights of Americans with the needs of Law Enforcement.  Really?  I beg to disagree.  We established a set of principles we saw to be self evident 250 years ago that say we have the right to be free from such surveillance.  To be sure the founders never saw such technology, or the prospect of such automated totalitarianism, but they established the principles by which we could evaluate what is right and wrong.  Warrantless surveillance on the basic comings and goings, behaviors and activities of kurt Citizenry by the government is far beyond the pale.  The needs of Law Enforcement officers play absolutely NO role in the calculus of this situation.  If we are to remain a free society then the government, and corporations, need to ask us for access to our private information.  I'm astounded that a US Senator wouldn't understand this, and would position the issue as some sort of balance between our basic rights as individuals and citizens of this great nation, and some undefined need to protect us from some undefined situation.  Remember - we've been "at war" with Drugs, Poverty, and now Terrorism for 50 years now - pleas of exigent circumstances begin to mean less and less every day.

My Response

I sent this response to Senator Feinstein yesterday.  I've yet to receive her reply:

Dear Senator Feinstein -

Your response is less than clear – do you support the right to privacy in regards to warrantless monitoring of American Citizen's locations via GPS location services built into devices, or do you not.  Your statement that you see the need to balance private with law enforcement needs is concerning, perhaps even disturbing.  As a former member of our nation's  intelligence apparatus I know well the capabilities we have, and what can be done with it – to provide warrantless access to this ubiquitous information is akin to sanctioning 24x7 surveillance of all Americans, a truly Orwellian prospect that any freedom loving American would find repelling.

So once again I ask for your support and efforts towards clarifying the rights of Americans to freedom from warrantless surveillance.   There is no balance to be met here.

Andrew Nygard

Question for all you out there

What's your position on this?  Make your own statement to your elected representative.

OWS tactics need a make over, or what does Army doctrine have to offer for OWS?

Friends of mine have been posting video and commentary on the OWS efforts to take parks or buildings  in Oakland.

J28 OPD Kettles Occupy Oakland #1 

These images are more than a little pathetic.  There's a reason the Constitution calls for a well trained militia - there's no plan of action, no command and control evident here.  

While I'm not condoning any of the below actions (see my closing comments) - I'd think taking downtown Oakland would be a breeze if the demonstrators followed a few basic tactics.  

A cursory read of US Army Field Manual 3-06: Urban Operations  offers a wealth of options for an insurgent force to employ in an urban area.  No doubt this is the basis for police planning and doctrine in preparation for engaging OWS, and highlights the anticipated tactics any urban insurgency might employ.  Re-reading this manual the other night (amazing what insomnia can lead you to)  got me to thinking - what could Oakland (or LA, or NYC or ... but you get the point) OWS do if they took the time to study the insurgency they're engaged in?  

So what words of wisdom does the US Army, after 10 years of counter insurgency in Iraqi and Afghani cities following a decade of occupation in the Former Yugoslavia where urban warfare ground both sides to a halt, have for OWS?  

Threat Objectives and their Implications for OWS

What follows are the seven "threat objectives" that military commanders have learned insurgencies or occupied countries employ in Urban areas, along with implications for OWS.  You can follow along for yourself in the manual, pages 3-2 to 3-5:

1) Control Access - for OWS - identify the choke points that the police will have to navigate to respond to different threats.  Deny police access to these points as they deploy, harass their command points as they've been established.  Threaten multiple points simultaneously as they respond to major action elsewhere denying them the ability to concentrate their forces or move them in response to action.

2) Negate Technological Overmatch - in the manual they contemplate "hugging" friendly (in this case police) assets to deny the use of superior firepower.  This may be a tactic to employ when faced with flash bangs or gas, but ONLY if OWS resources are employing gas masks themselves.  Dangerous here as, should police forces resort to violence there is no reasonable response for OWS resources other than to escalate to similar tactics, something to avoid in seeking to accomplish tactic # 5 below

3) Control the tempo - define the timing and pace of engagement - in all these videos the protestors literally walk, seemingly unprepared, into a confrontation or trap the police have engineered for them.  Consider the use of mobile scouts (bikes, cars, on foot in buildings etc) equipped with radio devices to communicate police movements and intent in advance of OWS main body movements.  Choose your point of engagement to your advantage rather than walking into the trap that's been laid for you.  Speed up engagement or movement in one location, only to shift to another, keeping police assets constantly moving to an action which has already faded away.  See tactic one additionally.

4) Change the Nature of the Conflict - rather than engaging in predictable marches, en masse, to a pre-communicated location, adopt more fluid maneuvering tactics.  If Oakland has two or three high value locations to occupy, consider occupying secondary locations.  Change tactics from occupation (relatively easy for police to address with their superior weapons and tactics) to hit and run operations aimed at disrupting key infrastructure points including Mass Transit, major Freeway choke points, and other places where a brief occupation would make a credible and lasting statement, allowing OWS assets to deploy, engage and achieve more limited objectives, and fade away before massive police assets can be brought against them.  Perhaps more dramatic would be to eschew marches and demonstrations entirely for some other, previously un-utilized demonstrative effort, shifting the movement from direct confrontation of "establishment" forces to something else.  (No, no bright ideas today, other than direct confrontation is a slippery slope that violates the non-violence mandate I lay down at the end of this post)

5) Cause politically unacceptable casualties - This one is almost too easy, as the police have shown a tendency in both Oakland and LA to violate constitutional mandates (reporters'  First amendment right of access to the situation), use uncalled for violence in apprehending protestors (violating the protesters' Fourth and Eight Amendment rights), as well as abuse prisoners once in their control (again violating protestors' Fourth and Eight Amendment rights).  Here OWS can make engagement politically too costly for the police to undertake through some simple tactics that they already are employing:  

• Embed reporters in OWS groups to live cast police excesses and work on popular opinion.  While this may take months, it ultimately is the best approach to break establishment and police will to action, and in all likelihood the police will engage in some atrocity which, when publicized, will change the political calculus significantly in OWS' favor. (see LA reports of prisoner abuse, UC Davis pepper spraying of peaceful protestors and other numerous abuses of power and trust by police forces nation wide)
• Engage celebrities in participating in, or more effectively simply being present to witness and comment on the events which occur.  The American public show an amazing deference and interest in this class of people, use them to your advantage.
• Enlist publicly elected officials to attend protests, as Supervisors in San Francisco did prior to OWSSF being shut down - this will make police action less likely, or, when undertaken, more likely to be restrained and within legal parameters

6) Allow no sanctuary - Deny police access to staging points.  Based on planned OWS action, identify their likely staging points and set in on them before / as their transport arrives - if they're afraid to dismount OWS will deny them the ability to accumulate tactical assets on the ground, and they'll have to withdraw to staging areas further away, and less responsive to the tactical situation.  Converge on individual police assets - this will longer term have the effect of forcing them into less nimble large groups in self defense.  NOTE- OWS must recognize the near certainty that human intelligence agents (HUMINT) have no doubt penetrated OWS planning activities and therefor must assume any plan of action is already known by police entities prior to engagement.  See point 4 above

7) Conduct Decentralized and Dispersed Operations - This is one tactic OWS universally seems to have not understood or learned.  DON'T march en-mass - it's too easy to trap or side track a large mob on the streets.  The police are well trained, have the advantage of weapons and prepared tactics. Instead employ guerrilla tactics - small bands (15 - 20 say) to roam and act independently.  Harder to target and control.  Appear and dissolve into the city - keep the police wondering where you'll appear next - if they can't accumulate overwhelming force they'll hesitate to act or deploy.  Their tactics will become cumbersome and not timely.  Use fluidity to flow in and out of their sights.

Implications for protest participants

POLICE

Police agents reading this should ask themselves - are we prepared to engage if faced with these tactics?  Perhaps most importantly, do you understand the damage you do to yourselves, as well as to the current government's legitimacy when you allow individuals and units to engage in the atrocities that have come to light to date.  Remember that it is the consent of the governed which determines your own legitimacy and you're doing harm.

OWS

OWS planners should consider whether any or all of the US Army's recommended tactics for them are applicable to their short and long term objectives.  Additionally, they should develop plans to contain the more violent of the participants in future demonstrations as their actions do not achieve their political objectives of winning the minds of the American People.

Nonviolence Mandate

In closing, I must highlight that it is my strong belief that non-violent protest is the only way to raise the American People's awareness of the OWS' political-economic platform for change.  OWS are dangerously close to reaching violent measures in recent videos.  The use of "shields" is one step closer to more violent actions including assault, arson and other means that I believe would be both deleterious to their effort, as well as inappropriate. As Gandhi and Martin Luther King proved, non-violent protest is extremely effectual in achieving societal as well as regime change.