Deciphering Misleading Unemployment Numbers

The most recent jobless numbers showed an unemployment rate of 9.2% – a really bad number, but the actual number is much worse, somewhere around 15%. The reason for the disparity is that the “official” rate (called “U-3”) does not include those who no longer receive unemployment compensation, as well as the millions of “discouraged” workers who have simply given up looking.

You can get a rather lengthy explanation of the survey process at the Bureau of Labor Statistics:


Additionally, much of official government reporting of the unemployment rate includes “adjustments” for things like “seasonal” workers, which naturally opens up a whole range of opportunities to “massage” the numbers, especially if pressure from the White House is involved. Some insiders have already suggested that the numbers are being twisted into pretzels in order to keep the number below 10% – at least until after the 2012 election.

But the bottom line is that the real number of unemployed (called “U-6”) is always greater than the U-3 number reported by the press. And as the U-3 number grows, the difference between the official number and the actual U-6 number grows exponentially. For example, when the official rate is, say, 4.9%, then the real number is not much greater, something like 6%, because just about anyone who wants a job can find one. But if the base number grows to 7%, the true number is closer to 11%. At an official rate of 10% the spread is more dramatic, with the real number of unemployed being about 18%, perhaps even more.

Thus in states like California or Michigan, where base unemployment rates of 14% or more have been reported, the actual rate is well over 20% – dangerously close to the worst numbers recorded during the depths of the Great Depression. Yes, it really is that bad.

Ironically, government interference like extending unemployment payments only exacerbates the problem – after all, it is essentially nothing more than paying people to not work. And while Obama is banking on getting votes from the unemployed, all the data show that the longer unemployment checks keep coming, the longer most people delay looking for work.

Politicians in general, and Democrats in particular, are fond of talking about what government can do to “create jobs” – but the harsh reality is that government does not, and cannot, create real jobs, meaning private sector jobs. Only businesses can do that. But they need a reason to take the risk of hiring new workers – an environment that is conducive to expansion.

And today, most private businesses are not hiring. Not because they don’t want to grow and prosper, but because they are quite simply terrified of the anti-business rhetoric coming from Barak Obama. His relentless attacks on successful corporations, including vilifying anyone who happens to fly on a corporate jet, betray Obama’s deep-seated hatred of the very free market capitalist system that he is sworn to defend.

From major corporations to “mom-and-pop” operations like “Joe the Plumber” the fear is that, in a worst case scenario, Democrats could regain control of Congress in 2012, and Obama gets reelected, yielding a second wave of reckless and inflationary “stimulus” programs, combined with huge tax increases on both individuals and corporations. They know full well that this would destroy an already fragile economy. So one could hardly blame business owners for their “wait and see” attitude.

And it need not be so. History and common sense will tell anyone with a rudimentary understanding of business and economics what needs to be done:

Cut Federal tax RATES on businesses and individuals, especially on the top income earners (who just happen to be the very small business owners who actually can create jobs). Reducing tax rates promotes growth and expansion, not only creating jobs, but actually yielding more tax REVENUE to the government. Conversely, raising tax rates, especially on those “wealthiest Americans” that Obama and the Democrats continue to demonize, has the opposite effect – it depresses economic activity, forces businesses to lay off yet more workers, and ends up bringing in LESS tax revenue.

Cut local taxes. Local property taxes, supposedly based on the value of the home or business, have remained high, in spite of the fact that home values have plummeted. Most “education funding” comes from property taxes, and soaring spending is pushing homeowners to the breaking point. Taxpayers who are faced with soaring food and gas prices cannot be expected to continue funding lavish pensions and benefits for already overpaid government union teachers.

Cut regulations. Many industries spend more than 40% of their revenue just conforming to needless, and often destructive, regulatory paperwork. In the average hospital, for instance, nurses now spend more time filling out government forms than they do taking care of patients. Medical facilities also have to hire additional administrative and computer personnel just to keep up with the reports. While some minimal regulations may be required in certain circumstances, the mountain of Federal, State, and local regulations on the books today would sink the state of Florida, and very few of them are genuinely necessary – they only increase the size and scope (and the cost) of government.

Cut government spending. Really cut it. Severely. Obama alone has increased government spending by almost $4TRILLION dollars, in just two years. And let’s not stop at Federal spending – we need to slash state and local budgets as well. The real reason we are where we are today is the reckless, out-of-control spending by government officials at all levels. Government bureaucrats are as addicted to writing those government checks as the government-dependent parasites who cash them. And neither of these groups will go to rehab voluntarily. They will have to be dragged to the table, kicking and screaming.

But unless we get serious about cutting taxes and slashing government spending, the economy will continue to flounder, and the unemployment rate may get even worse, or perhaps even more ominously, stay at current levels for the foreseeable future. And that will ultimately lead to disaster.