Don't Be Fooled, the Obama Unemployment Rate Is 11%


ACRU Staff


February 10, 2012

This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published February 9, 2012 on

When Barack Obama entered office in January, 2009, the labor force participation rate was 65.7%, meaning nearly two-thirds of working age Americans were working or looking for work.

When the recession supposedly officially ended in June, 2009, the labor force participation rate was still 65.7%.

In the latest, much celebrated, unemployment report, the labor force participation rate had plummeted to 63.7%, the most rapid decline in U.S. history. That means that under President Obama nearly 5 million Americans have fled the workforce in hopeless despair.

The trick is that when those 5 million are not counted as in the work force, they are not counted as unemployed either. They may desperately need and want jobs. They may be in poverty, as many undoubtedly are, with America suffering today more people in poverty than in the entire half century the Census Bureau has been counting poverty. But they are not even counted in that 8.3% unemployment rate that Obama and his media cheerleaders were so tirelessly celebrating last week.

If they were counted, the unemployment rate today would be a far more realistic 11%, better reflecting the suffering in the real economy under Obamanomics.

Just last month, while the Bureau of Labor Statistics reported finding 243,000 new jobs, they also reported in the same release that an additional 1.2 million workers had dropped out of the work force altogether, giving up hope under Obama. If labor force participation had remained the same in January, 2012 just as it was the month before in December, 2011, the unemployment rate would have risen to 8.7% in January rather than supposedly declining to 8.3% as reported.

Some additional facts highlight how misleading the reported unemployment rate, and the political rhetoric around it, can be. One year ago, 99 million Americans were unemployed or otherwise not working, and the unemployment rate was 9.1%. Today, while the reported unemployment rate is 8.3%, over 100 million Americans are unemployed or otherwise not working.

In January, 2009, 11.6 million Americans were unemployed, with 23% of those unemployed for more than 6 months. By January, 2012, 12.8 million were unemployed, with 43% of those out of work more than 6 months.

At the official end of the recession in June, 2009, America was 12.6 million jobs short of full employment. By January, 2012, we were 15.2 million jobs short, falling behind by another 244,000 in that month alone.

The time has come to begin to raise questions about the precipitous decline in the labor force assumed by BLS. Are the career bureaucrats there partial to President Obama, and favorable towards promoting his political chances for reelection? Or has the Obama Administration placed someone in a leadership slot over at the BLS or the unemployment statistics branch that is imposing this assumed sharp decline? Because of the oddness of this record setting decline, coinciding with President Obama’s ascension to office, these questions bear further investigation.

But even with the steep decline in labor force participation, the BLS report for January still shows some horrific numbers more than 4 years after the start of the recession. Besides the 12.8 million unemployed, another 8.2 million were “employed part time for economic reasons.” The BLS explains that “These individuals were working part-time because their hours had been cut back or because they were unable to find a full-time job.”

Another 2.8 million “wanted and were available for work, and had looked for a job sometime in the prior 12 months,” but “were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.”

That makes nearly 24 million Americans unemployed or underemployed. The unemployment rate in January counting them is not 11%, but 15.1% as reported by the BLS, a depression era level of unemployment.

For blacks, the unemployment rate was still 13.6%, even assuming another 350,000 African Americans dropping out of the labor force in January alone. For Hispanics, 650,000 were assumed to drop out of the work force in January alone, but the Hispanic unemployment rate was still in double digits at 10.5%.

For teenagers, the unemployment rate was still 23.2%, even though an additional 400,000 were assumed to have dropped out of the work force in January alone. For black teenagers, the unemployment rate was still nearly 40%.

Media and political discussions of Obama’s economic record suffer from at least two fundamental fallacies. One is that Obama’s record is to be measured by the progress made since the trough of the recession. Since that trough was so bad, of course the period since the trough is going to show some marked improvement. More important is how does that improvement compare to the prior peak before the recession? Have we caught up yet, and then continued to grow beyond that prior peak?

For example, the stock market may be said to have rebounded sharply from its bottom at the trough of the recession. But the Dow and other market measures still have not climbed back to their peaks before the last recession, more than four years after the recession started. Similarly, while the population has continued to grow, we are still more than 5 million jobs below the peak before the last recession.

The second fallacy is that Obama’s economic performance today is to be measured compared to performance at the trough of the recession. Of course more than four years after the recession started, the economy is going to be doing better today than it was at the worst of the downturn. That is why it is called a business cycle, the downs are naturally followed by ups in a free market economy. The question is how does the recovery compare to prior recoveries from steep recessions?

For example, while Obama and his media cheerleaders crow about nearly 250,000 jobs created last month, the most in the entire Obama Presidency, in some months during the Reagan recovery over 1 million jobs were created. In September, 1983, the rapidly recovering Reagan economy produced 1.1 million new jobs in that month alone.

Moreover, since the Great Depression, and before this last recession, recessions in America have lasted an average of 10 months, with the longest previously being 16 months. But here we are today 50 months after the recession started, and the economy is just beginning to show some signs of life. That goes under the category of way too little, way too late.

Obama apologists can’t say this poor performance of retrograde Keynesian doctrine was because the recession was so bad. That is because in the American historical record the steeper the recession the stronger the recovery. Based on this historical record, we should be nearing the end of the second year of a booming recovery by now.

Compare Obama’s recovery 2.5 years after the recession officially ended with the first 2.5 years of the Reagan recovery. By that point, Reagan’s recovery had created 8 million new jobs, the unemployment rate had fallen by 3.6 percentage points, real wages and incomes were jumping, and poverty had reversed an upsurge started under Carter, beginning a long term decline. In the second year of the Reagan recovery, real economic growth boomed by 6.8%, the highest in 50 years.

In contrast, under Obama’s non-recovery America has suffered the longest period of unemployment this high since the Great Depression, with record numbers fleeing the work force in despair. More than four years after the recession started, we are still over 5 million jobs below the peak befor
e the recession. Real median family income has fallen by 10%, all the way back to 1996 levels. More Americans are in poverty today than at any time since Census began keeping poverty records over 50 years ago. Last year, real economic growth totaled 1.7%.

When President Obama entered office in January, 2009, the recession was already in its 13th month. His responsibility was to manage a timely, robust recovery to get America back on track again. What he gave us instead, with his outdated, throwback, Keynesian economics, is the worst economic recovery since the Great Depression. A recovery now, way too little, way too late, cannot go back and change that record. For that record of American suffering and despair, the voters will now hold Obama accountable.



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