November 2015        

American unemployment: The real and the bogus

Bernard Murphy

The American economy is the model of what neo-liberal pundits in Ireland and elsewhere believe a progressive modern economy should be. Hence, the international corporate media circus has been trumpeting the glad tidings: the American end-of-summer unemployment figures are down to 5 per cent, from 6 per cent this time last year.
     The message for all of us: neo-liberal capitalism creates jobs and so benefits the bulk of the population of the United States. By extension, it shows how our economy can ascend from the doldrums and our youth can have access again to the prospect of having decent jobs.
     Forget about the calibre of this employment, and the fact that an inordinate number of those in employment subsist below the poverty line. Or that they may need to simultaneously hold two or three jobs just to survive. Just concentrate on that magical 5 per cent unemployment figure!
     How real is it? A brief look at how wool is pulled over the eyes of the unwary shows us that the said employment figure is completely bogus—that the real figure is more than four times that. So how was the 5 per cent arrived at?
     The US Bureau of Labour Statistics has six official unemployment criteria:
     U1: The proportion of the active population that has been unemployed for fifteen weeks or more. Last August this stood at 2¼ per cent (down from 3 per cent in 2014).
     U2: The proportion of the active population that has lost its employment or had finished its temporary employment in August 2015: 2.6 per cent (3.1 per cent in August 2014).
     U3: The proportion of the active population without work that actively sought employment in the previous four weeks. (This is the only official criterion normally used.) In August 2015 this figure stood at 5.1 per cent (6.1 per cent in August 2014).
     U4: Add to U3 the “demoralised workers”—those who stopped searching for work in the previous twelve months because economic conditions make them believe that such a search would be futile. Last August this figure stood at 5½ per cent (6½ per cent in August 2014).
     U5: Add to U4 those persons linked only marginally to the labour market who are neither working at present nor searching for work but claim they would like to work, are available for work, and have looked for work some time over the previous twelve months. Last August this figure stood at 6.2 per cent (7.4 per cent in August 2014).
     U6: Add to U5 those workers in temporary employment who wish to be fully employed but cannot be because of the prevailing economic circumstances. Last August this figure stood at 10.3 per cent (12 per cent in August 2014).
     All this data must be taken into account, therefore, rather than the U3 criterion alone, if we are to know what proportion of the American population is unemployed. Doing this we see that the unemployment figure in the United States is more than four times what is proclaimed. How did this obvious fudge come to be?
     The U6 criterion was modified in 1994 by the Clinton regime to put a more favourable spin on the unemployment data. Until that time it included not only “demoralised workers” who had stopped searching for work in the previous twelve months but also those who had looked for work at any time earlier than the previous year.
     In his web page Shadow Government Statistics (www.shadowstats.com) the investigative economist John Williams calculates the U6 criterion as it is without this Clinton massage, which is to say much more realistically. Thus he demonstrates clearly that the real rate of unemployment in the United States in August 2015 was a whopping 23 per cent—nearly a quarter of the country’s work force.

     In the graph we can see the evolution of American unemployment from 1995 to the present as reflected in the official U3 rate and in the U6 rate, both before and after the Clinton “massage.” So that bogus unemployment figures designed to hide the extent of the deepening unemployment crisis, as reflected in the Shadowstats graph, are worthless, being based on patently distorted data.

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