A couple weeks ago I looked at the problems with the official unemployment rate in the U.S. My argument was that the increasingly rosy employment statistics provided by government statisticians are in large part because millions of Americans have left the labor force – some on disability, some because of retirement, and some because it has become difficult to find an acceptable job. When these individuals leave the work force they are no longer counted as unemployed. Result: fewer employed turns into a lower unemployment rate. I estimated that based on the absence of at least eight million Americans from the work force who should otherwise be expected to be working, the unemployment rate would be about double the rate stated by government officials (about 12% instead of the official statistic of less than 6%).
David A. Pace, CFA
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