A year ago, the Obama administration reported the unemployment figure had dropped under 8% for the first time in over 40 months. Their new figure was at 7.8%, but that was not a realistic figure. In reality, the 7.8% was obtained by the U-3 unemployment figure that fails to take into consideration a number of additional factors. The U-6 figure at the same time was 14.4% unemployment.
Economist John Williams says that to obtain a more accurate indication of the unemployment scene that one needs to add the U-6 figures with those of the long term unemployed that quit looking but still list themselves as unemployed. That calculation gives him a total unemployment rate of nearly 23%.
When the Obama administration announced their latest 6.7% unemployment rate last month, it was still the erroneous U-3 figure and did not take into consideration all those who have been unemployed so long that they’ve given up looking and/or ran out of unemployment benefits. The previous unemployment benefits could be extended up to 99 weeks depending on each state’s unemployment rate, but those extended benefits ended in December, returning to 26 weeks of benefits. I also questioned whether or not their figures accounted for nearly as many layoffs as the reported number of new jobs.
As the White House continues to tout an improving job market, take into account that a third or more of the unemployed in 28 states have been out of work longer than six months and have run out of unemployment benefits. This is referred to as the long-term joblessness rate. Recent analysis conducted by the Economic Policy Institute, the current long-term unemployment rate for all 50 states and Washington DC averages out at 33%.
What does this really mean? Do you remember the Great Recession of 1983 created by the economic failures of former President Jimmy Carter? The long-term unemployment rate maxed out at only 26% in mid-1983. Currently, 41 states along with Washington DC have long-term unemployment rates of 26% or higher.
Doesn’t it make sense that Obama’s sudden drop in the unemployment rate has more to do with the millions of Americans who lost the unemployment benefits and became part of the long-term unemployment rate?