U.S. Unemployment Numbers Are a Lie (NY Post)

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Headline: THE U.S. UNEMPLOYMENT NUMBERS ARE A LIE

Source: John Crudele, New York Post, 31 July 2001

URL: http://www.nypost.com/business/36264.htm

How can this country's unemployment rate be so low when so many people are being laid off?

The answer: smoke, mirrors -- and laziness on the part of the media.

The unemployment rate in the U.S. should really be about 5.2 percent right now, a lot worse than what Washington will probably claim on Friday.

That view was reinforced last Friday when Washington reported the worst economic conditions in nearly a decade. That higher unemployment number is what you get when you make a guesstimate based on the huge number of people who are now going into their state unemployment offices and asking for benefits.

There are a lot of different ways to come up with any economic stat. But the federal jobless numbers have been remarkably low considering how many hundreds of companies have announced huge layoffs in the last few months.

Just last week, for instance, Hewlett-Packard, JDS Uniphase, Reuters and Lucent announced that thousands of workers would soon be let go. Those announcements are part of a steady stream of cost-cutting measures that have workers across the country quaking.

But you don't get that sense of bloodshed from Washington's numbers. While the unemployment rate has risen from 3.9 percent to 4.5 percent in recent months, the kind of job cuts we are seeing probably translates to an unemployment rate that is 0.7 percent higher than what the government is saying.

That means millions of unemployed workers are not being acknowledged by the government. Here are some numbers.

So far this year, for instance, companies have announced that 777,000 workers were being let go. That's triple the layoffs at this time last year. And the downsizing is much greater than happened during the 1991 recession, according to John Challenger, whose firm -- Challenger, Gray & Christmas -- monitors the job market.

The current unemployment rate, says Challenger, "certainly doesn't reflect the heavy, heavy downsizing we've seen."

On Friday the U.S. Labor Department will announce the job figures for July. Experts believe that the government will disclose that more jobs were lost to the recession in July and that the unemployment rate either stayed put at 4.5 percent or inched up by one-tenth of a percentage point.

At that rate, there is no way the federal government's numbers will ever catch up to where they should be.

John Vail, an economist with Fuji Futures Inc. in Chicago, tells me that this year there has been a 42 percent increase in the number of people collecting unemployment insurance from the states. "That's solid data, from the states," says Vail, who, like some of us, thinks the federal numbers are vastly understating the unemployment problem.

"That indicates that unemployment is rising much more rapidly than what is shown in the federal monthly report which is based on surveys and estimates," says Vail.

I've said in this column before -- and others, including The New York Times, are now repeating it -- that the unemployment rate in this country would be closer to 10 percent if people who have given up looking for a job were counted.

But even if you don't include those "discouraged workers," as Washington calls them, the situation is probably as bad as you think from anecdotal evidence.

Vail calculates that the unemployment rate should be at 5.2 percent.

Other people who are using a totally different set of numbers agree with that calculation.

-- Andre Weltman (aweltman@state.pa.us), July 31, 2001

Answers

What a lot of people don't realize is that there is lag time on all these announced layoffs. In the first place all these layoffs are not immediate. In the second place, with severence packages, it takes time for these figures to show up in unemployment data. Which means, simply, even with layoffs announced 6 months ago, these are not truly and accurtely reflected in the unemployment figures yet.

-- Wellesley (welllesley@freepot.net), August 01, 2001.

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