We Were Wrong: Jobless Available Workers As High As 41.4%

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As we mentioned in our article this week, we discovered an error in our January 19th article after it was published. We actually underreported the portion of jobless Americans. Our number only described those who are not able to, do not want to or have given up looking for work. It did not include the people who are represented in the unemployment rate.

We do not agree with Pethokoukis when he says, “Using Marotta’s ‘logic,’ maybe the ‘real’ unemployment rate is merely the share of the civilian noninstitutional without a job. That comes out to a whopping 44.5%!” The BLS statisticians can debate the unemployment rate forever; that’s not what we’re talking about. However, Pethokoukis he is correct when he implies we underreported the portion of jobless citizens. His number of 44.5% overreports it, however.

According to the BLS, “labor force participation rate” is “the labor force as a percent of the civilian noninstitutional population.” “Civilian noninstitutional population” means U.S. citizens living within the 50 states who are older than 16 and “are not inmates of institutions (e.g., penal and mental facilities, homes for the aged)” or “on active duty in the Armed Forces.”

Our error arises in their definition of labor force. They say labor force “includes all persons classified as employed or unemployed.” Meaning that 37.2% represents the 91.8 million Americans “not in the labor force” as a portion of the 246.7 million Americans qualifying as part of the “civilian noninstitutional population” for December 2013. It represents the students and homemakers in addition to the discouraged workers, as we knew, but actually fails to represent those people represented by the unemployment rate.

Civilian Noninstutional Population for December 2013Per the BLS definition, people who were “unemployed” are those who “had no employment” while they “made specific efforts to find employment” and “were available for work.”

Unemployment in its truest definition means the portion of people who do not have any job. Thus, the total jobless actually should be the 37.2% representing those not in the labor force plus an additional 4.2% representing the 10.4 million unemployed members of the civilian labor force.

As a result, 41.4% would be the real number for the portion of available workers without jobs during December 2013.

 

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)

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