The Core Rate of Unemployment is Horse Crap

Paul Mladjenovic

Today the federal government released its unemployment report for February 2010. The official unemployment rate held steady at 9.7%. Some economists welcomed this as a sign of a stabilizing economy. Perhaps someone should tell these economists that the official unemployment rate is misleading. It is a sign of horse crap. Why?

The official unemployment rate LEAVES OUT those folks that are discouraged and have ceased looking for work. It also leaves out those that are "under-employed"; those that no longer have full-time jobs but have settled for part-time work. In other words, the official unemployment rate...

leaves out...A LOT OF UNEMPLOYED PEOPLE!

The moment an unemployed person drops out of the job search process because they are discouraged and have ceased looking, they are no longer officially counted as unemployed. They end up in a more obscure (but more accurate) statistic referred to as the "U-6" unemployment rate. In the same report, this down-played rate is over 16%!

Some of you may remember an essay I did a few years ago where I criticized the "core rate of inflation" which was an official government statistic which tracked inflation but totally left out "food and energy" from its calculation. Some humorously jabbed the core rate of inflation and described it as "the rate of inflation...excluding inflation".

The statistical wizards at the federal government have done to unemployment reporting what they did to inflation reporting. It is time for some observers to call the official unemployment what it should be called: "the core rate of unemployment". That way the satiric observers among us can describe the official unemployment rate as "the rate of unemployment excluding unemployment".

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Copyright © 2010 Paul Mladjenovic

Paul Mladjenovic, CFP is the author of Stock Investing for Dummies and his national investing & financial seminars are at www.ProsperityNetwork.net. His blog is at www.Mladjenovic.blogspot.com and he is the editor of the Prosperity Alert newsletter.

Paul Mladjenovic | Email

www.FinancialVortex.com

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