by
Paul Craig Roberts
PaulCraigRoberts.org

Recently
by Paul Craig Roberts: Bradley
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Statistician
John Williams (shadowstats.com)
calls the governmentÂ’s latest jobs and unemployment reports
“nonsense numbers.”

There are a
number of ongoing problems with the released numbers. For example,
the concurrent-seasonal factor adjustments are unstable. The birth-death
model adds non-existent jobs each month that are then taken out
in the annual downward benchmark revisions. Williams calculates
that the job overstatement through November averages 45,000 monthly.
In other words, employment gains during 2012 have been overstated
by about 500,000 jobs. Another problem is that each monthÂ’s
jobs number is boosted by downside revision of the previous monthÂ’s
jobs number. Williams reports that the 146,000 new jobs reported
for November “was after a significant downside revision to
OctoberÂ’s reporting. Net of prior-period revisions, NovemberÂ’s
seasonally-adjusted monthly gain was 97,000.”

Even if we
believe the government that 146,000 new jobs materialized during
November, that is the amount necessary to stay even with population
growth and therefore could not be responsible for reducing the unemployment
rate from 7.9% to 7.7%. The reduction is due to how the unemployed
are counted.

The 7.7% rate
is known as the “headline rate.” It is the rate you hear
in the news. Its official designation is U.3.

The Bureau
of Labor Statistics has another official unemployment rate known
as U.6.
The difference is that U.3 does not include discouraged workers
who are not currently actively seeking a job. (A discouraged worker
is a person who has given up looking for a job because there are
no jobs to be found.) The U.6 measure includes workers who have
been discouraged for less than one year. The U.6 rate of unemployment
is 14.4%, about double the headline rate.

The U.6 rate
does not include long-term discouraged workers, those who have been
discouraged for more than one year. John Williams estimates this
rate and reports the actual rate of unemployment (known as SGS)
in November to be 22.9%.

In other words,
the headline rate of unemployment is one-third the actual rate.

The drop in
the November headline rate of unemployment from 7.9 to 7.7 is due
to a 20.4% increase in the number of short-term discouraged workers
in November. In other words, unemployed people rolled out of the
U.3 measure into the U.6 measure.

Similarly,
a number of short-term discouraged workers roll out of the U.6 measure
into John WilliamsÂ’ measure that includes all of the unemployed.
Williams reports that “with the continual rollover, the flow
of headline workers continues into the short-term discouraged workers
(U.6), and from U.6 into long term discouraged worker status (a
ShadowStats.com measure), at
what has been an accelerating pace. The aggregate November data
show an increasing rate of individuals dropping out of the headline
(U.3) labor force.” In other words, the headline rate of unemployment
can drop even though the unemployed are having a harder time finding
jobs.

The U.S. government
simply lowers the unemployment rate by not counting all of the unemployed.
We owe this innovation to the Clinton administration. In 1994 the
Clinton administration redefined “discouraged workers”
and limited this group to those who are discouraged for less than
one year. Those discouraged for more than one year are no longer
considered to be in the labor force and ceased to be counted as
unemployed.

If
the U.S. government will mislead the public about unemployment,
it will also
mislead about Syria, Iran, Iraq, Afghanistan, Libya, Somalia, Pakistan,
Yemen, Lebanon, Palestine, Russia, China, and 9/11. The government
fits its story to its agenda.

A government
that wants to cut the social safety net doesnÂ’t want you to
know that the unemployment rate is 22.9%. A government that wants
to cut the social safety net when between one-fifth and one-fourth
of the work force is out of work looks hard-hearted, mean-spirited,
and foolish. But if the government reports only one-third of the
unemployed and presents that rate as falling, then the government
can present its cuts as prudent to avoid falling over a “fiscal
cliff.”

If the “free
and democratic” Americans cannot even find out what the unemployment
rate is, how do they expect to find out about anything?

December
10, 2012

Paul
Craig Roberts, a
former Assistant Secretary of the US Treasury and former associate
editor of the Wall Street Journal, has been reporting shocking cases
of prosecutorial abuse for two decades. A new edition of his book,

The
Tyranny of Good Intentions,
co-authored with Lawrence Stratton, a documented account of how
americans lost the protection of law, has been released by Random
House. Visit his website.

Copyright
© 2012 Paul
Craig Roberts

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