Summary of US Real Unemployment – January 2012

As we note each month, the economy, in order simply to keep up with the nation’s natural population increase, must add around 150,000 new jobs each month (and evidence at least 3.0% annual GDP growth).  Yet with real unemployment remaining at nearly an unprecedented level, an additional or further 150,000 to 200,000 new jobs are needed each month – i.e., 300,000 to 350,000 new jobs per month in the aggregate – in order to begin to see meaningful improvement in real terms.  However, for calendar year 2011 non-farm payroll gains averaged 152,000 jobs a month, and GDP in the fourth quarter grew at an annual rate of only 2.8% (versus 3.2% expected).

As we also note, the official BLS unemployment announcement:

1.    Rather than relying on much more accurate payroll data, uses only an estimate based on its Current Population Survey of households [attachment 1] – often referred to as the “Birth/Death Model” – which fairly consistently overestimates actual job creation.

2.    Always excludes changes in employment among the nation’s 11.0 million farm workers and self-employed workers.

3.    Most important, does not take into account the 14.7 million workers who are:

i.    “Part-time-of-necessity” (i.e., the so-called “underemployed”, who usually earn at the very low end of the wage scale and usually have no benefits) because their hours have been cut back or they’re unable to find a full-time job (now an extremely high 8.2 mm workers);

ii.    “Marginally attached” to the labor force because while wanting a job, they’ve not searched for one in the past four weeks because of lack of availability or skill or because of personal reasons (2.8 mm workers); or

iii.    “Discouraged” and have removed themselves from the labor force (3.7 mm workers), a notable number which has increased by 632,000 since the Recession began and 414,000 since the Inauguration.

Our alternative Summary of U.S. Real Unemployment makes these three adjustments.  This Summary also identifies average weeks unemployed, job openings, and the Real Jobs Gap that needs to be filled in order to be at 5% full employment in real terms.  As of January 31:

•    The number of Real Unemployed Workers, in all categories, actually increased by 153,000 workers to 27.5 million, an aggregate figure which continues to be more than twice BLS’s official figure of 12.8 million.  The combined professional and business services sector increased by 70,000 jobs; government employment further declined by 14,000 jobs; overall construction employment increased by 21,000 jobs; and, most important by far into the long term, employment in the all-important but now extremely depleted manufacturing sector increased by 50,000.

•    The Real Unemployment Rate was 17.1%, which was unchanged from January’s Real Unemployment Rate of 17.1% and compares to BLS’s official rate for January of 8.3%.

•    The Real Jobs Gap was 19.4 million jobs.

•    The number of Real Unemployed Workers has increased by 10.8 million since the start of the Recession in December 2007, and by 3.0 million since the Inauguration.

Officially, per the BLS, the average number of weeks unemployed is 40.1 and the number of workers unemployed a half year or longer is 5.5 million.  In real terms, however, an estimated 8.2 million or so workers (around 30% of the overall Real Unemployed) have probably been out of full-time work for more than a year.  These three figures, when considered together, are the best measure of the nation’s Real Unemployment condition, and they are much better than BLS’s weekly “initial jobless claims” number, which is particularly unreliable near the bottom of what is still, in macro terms, a largely jobless recovery.