Unemployment & Labor Force Participation
What's real, and what's not. Let's get at least a little bit closer to the truth.
Whenever I hear people talking about the unemployment rate I just want to shut my ears, puke, or both; the statistic is almost meaningless. Let’s look at the various published measures of the unemployment rate:
U-3 <the official unemployment rate> gets the most media attention when released each month by the Bureau of Labor Statistics (BLS). But many economists view the U-6 rate as the more meaningful because it covers a larger percentage of people who are unemployed.
Please notice in the table above that the U-6 rate is almost double the official rate.
Why do the feds generate statistics on unemployment?
When workers are unemployed, they, their families, and the country as a whole lose. Workers and their families lose wages, and the country loses the goods or services that could have been produced. In addition, the purchasing power of these workers is lost, which can lead to unemployment for yet other workers.
A U-6 that is almost double the official U-3 rate is just the tip of the iceberg problem that is the calculation of the unemployment rate. How is the “civilian labor force,” the denominator in unemployment calculations, counted? That number is known as the “Labor Force Participation” rate, or LFP for short. According to Statista, “In August 2024, the civilian labor force amounted to 168.55 million people in the United States.” According to the Bureau of Labor Statistics (BLS), to get the unemployment data, a survey is conducted monthly, the Current Population Survey (CPS); “There are about 60,000 eligible households in the sample for this survey. This translates into approximately 110,000 individuals each month…” So, we’ve gone from a labor force of about 169,000,000 people, to a survey of just 110,000, or 0.065% of the total labor force. So, needless to say there is margin for error. And why are only 60,000 households eligible? I don’t have that answer.
Military service members, ~2.86 million, are not counted amongst the labor force, and for good reason; fighting wars is not a productive use of a person’s time, in Gross Domestic Product) GDP terms. But for some absurd reason the ~23.7 million federal government workers are counted. I say absurd because again, on net they produce nothing in GDP terms. All dollars spent on the federal government must be first confiscated from the citizenry, and the citizenry would almost certainly choose to spend the vast majority of the dollars in play on something other than the federal government!
Let’s do some quick math. From the above table, we have U-6 unemployment rate (the most inclusive and of course I’m all for inclusion) of 7.9% in August of 2024, on a Civilian Labor force of ~168.55 million people…that means 13,315,450 people are unemployed. Now, if I subtract the 23.7 million unproductive federal government workers from the 168.55 million, we are at a productive civilian labor force of 144,850,000. If I then take the unemployed 13,315,000 ÷ 144,850,000, that equals a truer unemployment rate of ~9.2%. And of course, I’m not even counting all of the equally unproductive (in GDP terms) 19.23 million state and local government workers in the nation; nor am I counting all 3.8 million public school teachers (because if the government has to force us to use the service K-12 education is compulsory, by law, it’s probably because a lot of people wouldn’t choose to fund the service voluntarily, hence compulsion is necessary, and were they not compelled many citizens would choose rather to spend their money in more productive ways). But, if I did remove those folks from the “civilian work force,” the U-6 would be over 10%.
And I’ve only peeled one layer off the rotten onion that is the calculation of the unemployment rate. The U-3 official rate is half, or less, of the true unemployment number. Take it for what you will, but that’s my 2 cents on the subject. The U-3 official rate is used for its propaganda value, period.
2024 Oct 01 Update
I lost a little sleep over this last night, and it wasn’t about the unemployment numbers per se; it was about the labor force. I went back and did some additional math. Based on the numbers and sources included above:
The total labor force, including the military, is 171,410,000; subtracting from that those in the military and federal, state and local governments (45,790,000) leaves 125,620,000 in the private sector labor force.
So, 26.7% of the total labor force are military and government employees, more than 1 in 4; in other words, on average, every fourth person you see is paid by the first three. There is nothing "limited" about our government. And this calculation doesn't include all of the people in businesses contracting with the governments for the provision of supplies, materiel and services; it doesn’t include public school teachers and administrators; add in those folks, and I’d guess were looking at more than 1 in 3 is paid for by taxes on the other 2.
Through a tax dollars lens, I looked at the effects of unlimited government in the post, Whom Shall Ye Serve.
