The real unemployment rate is 11.1% (not 8.1%) if you use the size of the work force as it was in 2009

May 6th, 2012 | Author: Posted by Ben Hart

When will Romney start using these numbers in his speeches?

Since Obama took office, the workforce has shrunk to its lowest level in 30 years.

Hey, if no one is looking for a job because there are no jobs, we can have a 0% unemployment rate. Maybe this is the Obama economic plan.

JAMES PETHOKOUKIS: If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.6% today—the U-3 unemployment rate would be 11.1%.

Now, this doesn’t take into account the aging of the Baby Boomers, which should lower the participation due to rising retirements. But is that still a valid assumption given the drop in wealth since 2006?

If you take into account the aging of the Baby Boomers, the participation rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the partipation rate would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.7%.

If the participation rate just stayed where it was last month, the unemployment rate would have risen to 8.4%.

Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate, perhaps the truest measure of the labor market’s health, is still a sky-high 14.5%.

The employment-population ratio dipped to 58.4% vs. 61% in December 2008. An historically and alarmingly low level of the U.S. population is actually working.

And given that real disposable income has been flat the past two years, it stands to reason that many of the jobs being created are in low-wage sectors. Indeed, hiring in sectors such as retail and leisure has accounted for a whopping 40 percent of the jobs added over the past two years.

The labor market remains in sad shape—despite Obama White House claims that it’s “continuing to heal”—and it is unlikely to improve much if the economy continues to grow around 2% or so.