It's Labor Day weekend 2020: So what IS the REAL unemployment rate?

While the stock markets began to correct a bit, from their insane highs last Friday, "good news" came out.  The U.S. unemployment rate dropped to 8.4%.  So what does that mean?  Most people think that means 91.6% of American adults have a job, right?  Actually, no, that's not even close to true.  

The 8.4% number is considered the "official" unemployment rate by Washington and the major media, it's the red line is this chart above.  The reason is because it's the lowest rate, and it looks the best in TV and web reports.  That 8.4% number is the U-3 number, for August 2020, from the U.S. Bureau of Labor Statistics (BLS).  The problem with the U-3 unemployment number is that is doesn't include a lot of people who are not working, in fact doesn't include most of the people who are not working.  In any "normal" time, unemployment at 8.4% would be catastrophic, economists want to see real unemployment at about 3% to 4%.  So this U-3 more than number is double that.  That's bad, horrible, in fact, in "normal times."  But in a year when close to 50 million lost their jobs in a few months, most of them"temporarily" lost, 8.4% is LESS BAD, than the 15% a couple of months ago.  The problem is, the U-3 number doesn't count about 3/4 of the U.S. adults who are actually not working.

There's another unemployment number, the U-6 number, and it's just as official as the U-3 number, and it's also put out by the BLS, that's the U-6 unemployment rate.   The U-6 number dropped to 14.24% for August 2020, and that's the gray line above.  What's the difference?  The U-3 number basically counts people with traditional jobs who applied for unemployment insurance, that's all.  The U-6 number takes that, and adds in people who are forced to work part time, because they can't find full time work, and people who have been discouraged from looking for work in immediate future, they don't think they can find any job soon.  So this U-6 number, makes more sense, it's every bit as official as the U-3 number, and it tells us that over 14% of working people in the U.S. aren't working right now.  

So what's that scary blue line above, that figures U.S. unemployment at 27 to 28%?  That's the number by this website, shadowstats.com, and it takes the U-6 number, and adds in the "long term discouraged" workers, those are American adults of working age, who simply have completely given up looking for work altogether.  They either don't think they can ever find a job again, or they have some way to survive without working.  

The total American "workforce," is just under164 million people, out of the total 328 million (+/-) Americans.  The shadow stats number is the closest to actually showing us how many of the people in the "workforce" are not working right now.  So if we figure 27% of the "workforce" isn't working right now, that's 44.5 million American adults NOT working, out of 164 million.  If you go through all the actual Bureau of Labor Statistics numbers, you'll find that well over 44.5 million American adults are NOT working right now.  Here, dig through the numbers yourself.  Here's the official stats for August 2020.  If you look at the "participation rate" on this chart for August 2020,it says 61.7%.  That means 38.3% of the "American workforce" isn't working right now.  Some of those are housewives who take care of the kids, or dads doing that job, and some others who don't work a job or business.  So the shadowstats number, roughly 27%, is the closest to  a "people who should be able to find work, but can't" number, which is what the unemployment number is supposed to be.

This number doesn't include gig workers, and microbusinesses (1 person business), and small businesses that have lost a lot of their income, but are technically working.  So even the 27% number doesn't really give us a good look at how bad of a hit the economic crash (which started with the Repo market in Sept. 2019) AND the Covid-19 shutdown, have hit real world working (and potentially working) Americans.  

There's a large group, 7 million + men, and a growing number of women, American adults, who don't even try to find work.  This group seems to be living largely on YOUR tax dollars, permanently, getting government checks, from Social Security Disability and other sources.  The only person who has looked into this growing group is Nicolas Eberstadt, in his book, Men Without Work.  This is a big part of the long term unemployed, and pretty much no one is studying this major American issue right now.  And we really need to.  Here's a short news clip on his work (February 2017), and here's a full speech by Nicolas Eberstadt, explaining this issue in detail, from 2017.

CNBC asks if we're in a great depression, citing huge big city unemployment numbers 7/21/20

In this CNBC article from last Tuesday, they actually printed the words "Great Depression," on CNBC.  Believe me, that's a big moment when they admit that's a possibility.  The reason the article asks the question is because of the huge unemployment numbers in major cities right now.  Here are the June unemployment numbers from the article:

New York City- 20.4% unemployment

Los Angeles- 19.5%

Chicago- 16.1%, 

Detroit (it went up)- 17.7%. 

Real unemployment stats are likely higher, only people actively seeking employment, and signing up for unemployment get counted.  There were at least 7 million working age men not officially working and not looking for work before all of this started (Eberstadt- "Men Without Work"), and unemployment doesn't include a lot of independent workers, gig workers, small business people not working because or mandatory closures, people with reduced hours, or people who've accepted pay cuts.  In all likelihood, we're probably near or over the 25% unemployment threshold of The Great Depression of the 1930's, if everyone could actually be tallied up. 

The article says there's no real definition of "great depression."  According to economist Ravi Batra's books, which I read in 1989-1990, there is, or at least was, a definition.  A recession is an economic contraction (total economy shrinks) for two consecutive quarters, meaning 6 months.  A depression is an economic contraction for 3 years, OR a 10% drop in GDP.  We may see a 10%+ drop in GDP in the official Q2 numbers coming out next week, July 30-31.  A great depression, by the traditional definition is an economic contraction for 5 years or more. 

My personal opinion, and the reason I've been writing on this subject for about 3 years now, is because I think we're at the start of a true depression, and it will feel like a full blown great depression of 3-5, and likely 7 years, of tough economic times.  Since the traditional definition has been abandoned, I don't know what this economic downturn will be called, but it will be a long tough ride for most Americans.  BUT, recessions and depressions are also a great time of innovation, new business ideas, new industries emerging, and a lot of opportunities hidden in the economic mess.