The REAL Unemployment Numbers Are Revealed

The unemployment numbers for December came in last Friday…85,000 jobs were lost, 10,000 more than expected. The Unemployment rate remained at 10%. How does that happen where you lose 85,000 jobs and unemployment remains the same? Sounds a little suspect to me. So I dug deeper to find out what is really going on here.

Here’s what I found. The 85,000 job loss comes from the “business survey”, which uses many estimation tools, including the birth-death ratio for businesses. The mechanics in coming up with the business survey allow the information to be gathered quickly, but it also makes the information far less accurate. That’s why you see the previous month(s) numbers revised often times.

Another survey that is used is the “household survey”, where a sampling of households receive actual phone calls. This survey is used to get the rate of unemployment – but the survey can also give you the number of people in the workforce, as well as its own version of job losses or creations each month. And last month, the survey indicated that 661,000 left the workforce.

What does that mean, “leaving the workforce”? It’s a “discouraged worker”, who has not looked for a job during the past four weeks. With this in mind, I feel there are a few contributing factors that would help us understand why this would indicate such a large number of people “exiting the workforce.” And more people leaving the workforce means less people counted as unemployed.

There is a lesser known report that the Labor Department releases that does include the short-term “discouraged worker”, as well as those who are employed part time, but really want a full time job. They call this the “U6 Unemployment Rate” and it rose to 17.3% in December. The U6 report showed a humongous 589,000 jobs lost, which is a much better picture of what really happened.

Finally, if you add long-term “discouraged workers”, you get the chart below, with unemployment running close to 22%. This is quite a different version from the “officially” released version.


The first thing we have to do to turn things around is tell ourselves the truth. This is a good start. Now let’s start creating jobs that will put people back to work.