How the Government Establishes the Unemployment Rate

unemployment rateYou can’t be faulted for assuming that an unemployment rate of 9.4% means exactly what it seems to on the surface, that almost ten percent of people in the country who want to work cannot. Well yes and no. As with all government generated statistics, the end result is often not as accurate as one would hope. For example, exactly how do they come up with this unemployment rate that’s had us all in a tizzy for the past several years?

Each month, the Bureau of Labor Statistics conducts a random survey of 60,000 people around the country. If a respondent says he is both out of work and seeking employment, they are marked down as unemployed. But if you don’t have a job and, for whatever reason, have given up looking for work, you no longer count as part of the labor force and are not part of the unemployment rate. If you’re sick, discouraged, or have decided to take on household responsibilities rather than ply your trade in the traditional world – doesn’t matter – you still don’t count as unemployed.

The upshot of this is that the true picture of how many people are not working in America today is seriously understated. In fact, the number of people leaving the work force and no longer seeking employment keeps the officially reported unemployment rate waaaayyy down. What the BLS is actually telling us is that almost ten percent of a random sampling of people currently looking for work are unable to find it.

Is this a startling difference of semantics? Maybe not. Make of it what you will but rest assured that government hacks have a vested self interest in painting as rosy a picture of the economy as possible. The fact that they’ve even allowed it to become public knowledge that our unemployment rate is near ten percent makes us at AMA believe that the reality is worse. Much worse. The fantasy world of 9.4% unemployment has about as much basis in the real world as sub-four percent inflation. Ultimately, the point we’d like to make is that it makes no sense at all to live your life by government numbers of any sort. They’ll only bring you down. Pay them no mind because no one knows what the actual situation is anyway. All that matters is what’s in your brain and how you’re going to use it to create wealth.

The American Monetary Association Team

American Monetary Association

Flickr / jronaldlee

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