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.

The REAL U.S. unemployment rate is somewhere between 10% and 30%

The Money GPS puts out daily videos with a whole bunch of firsthand chart, stats, and articles, about the economy and current trends.  These can be depressing, but it's a lot of solid economic data from firsthand sources, and he includes the links so you can dig deeper into any issue, if you like.  For these reasons, I watch his videos every day.  

This Money GPS video from August 16th, 2020, shows a Shadow Stats chart about the different unemployment rates available today.  He shows the chart at 8:08, and talks about it.  Here's the chart from shadowstats.com.  

The red and gray lines are official statistics from the U.S. Bureau of Labor Statistics.  The red line is the U3 unemployment rate, which primarily counts people who have recently applied for unemployment.  This is the unemployment rate you'll hear in the mainstream and business media, because they want things to look as positive as possible.  But it does not count everyone in the U.S. who's out of work, not even close.

The gray line is the BLS U6 unemployment number, down to about 16% to 17% right now.  This is also an official U.S. government stat, and includes people who may have been forced to work part time, but would prefer to work full time.

The blue line is the shadow stats number, which adds in the people could work, but are discouraged, or have given up looking for a traditional job, for whatever reason.  Before the year 1970 or so, there were very few people in this category, but the number has grown dramatically since, and no one knows exactly why.  

Think tank brainiac, and author, Nicolas Eberstadt, wrote a book on this group of people in 2016, called Men Without Work: America's Invisible Crisis (not a paid link).  Here's Eberstadt speaking on this topic, in 2017.  The number of these men was about 7 million then, and has grown since, by all accounts.  This number of long term unemployed people, not even looking for work, will most likely grow dramatically in the next couple of years. 

 Ebertadt says there is a growing number of women in this category, as well.  These are able bodied people, of working age, who are not even looking for work anymore.  Some of these people have felony records, and could not find good work after release from prison.  Many seem to be former low skilled factory workers who couldn't find decent employment after their local factories shut down, 10-20-30 years ago.  Many now get government checks, largely Social Security Disability.  I met dozens of these people when I was living in North Carolina, in the low income areas there.  All in all, very little is know about this huge group, and no one is really researching this issue in a serious way.  In addition, the nation's opiate addiction epidemic, is very highly tied to this group of people.

Whatever the cause, they are part of the "working age American" group, and they are unemployed over the long term.  So when you count the unemployed, if you want to be accurate, they should be counted.  Hell, I'm officially in this group, though I do freelance artwork, and and I'm working on building a viable business out of that.  

But the shadow stats number, now around 30% of the U.S. workforce, shows the most accurate total  number of working age people who are not working, for whatever reasons.  And that puts our current situation right up there with the numbers unemployed during the Great Depression of the 1930's.  Long term solution ideas should take this large group of people into account.