Unemployment Jackpot

Don't trust unemployment figures. They're not telling you nearly the whole truth.

The number the news gives you is only roughly the percentage of the work force that are actively on unemployment benefits. It's not counting the people who have exhausted those benefits and are still trying to find a job, those who have stopped looking for work altogether, and those who are "underemployed"...people who are only working less than 20 hours a week and want to work full-time and are not in school. These folks are called "marginally attached workers" and are not counted by the unemployment numbers you see in the papers...the Labor Department's "U3" figure.

The much broader number the Labor Department has that DOES include marginally attached workers, called the "U6" in labor parlance, is the key to understanding how bad things really are. The worse a recession gets, the worse the non-U3 numbers get too.

For December, the U6 was 13.5%, not the 7.2% U3, and a lot of folks believe even the U6 is too low to be an accurate picture of how many folks are truly employed, as the U6 only counts the civilian work force, and not government layoffs.

The labor department changed how it counted everything back in 1990 under Poppy Bush. That's the reason you're seeing these ridiculously low unemployment rates under Dubya and Clinton...they were pretty much fake. If we were still using the old formula for unemployment, the real rate for December 2008 would have been over 17%. That's how many people are really out of work right now or underemployed, more than one in six people.

If you go on that rule of thumb that the real unemployment rate is about 2x to 2.4x the published national U3 number, the state unemployment numbers are horrifying.

States with the highest unemployment rates in December 2008:

1. Michigan, 10.6 percent
2. Rhode Island, 10 percent
3. South Carolina, 9.5 percent
4. California, 9.3 percent
5. Nevada, 9.1 percent
6. Oregon, 9 percent
7. District of Columbia, 8.8 percent
8. North Carolina, 8.7 percent
9. Indiana, 8.2 percent
10. Florida, 8.1 percent

Remember folks, these are the massaged U3 numbers, and in case of Michigan and RI, they are above ten percent...meaning that by our rule of thumb, real unemployment in those states are closer to the 20-24% range. Florida's 8.1 percent means a reality of 16-20%. California's 9.3% is 18-22% actual unemployment...and given California has about one seventh of the total population of the US, that's frightening.

In other words, there's already evidence that the real unemploment rate in this economy is far, far worse than anybody's willing to really admit. We're often told that our economy is nowhere near the Great Depression right now...with an "unemployment rate of 7.2%", we have a long way to go to the figure (actually a guesstimate) given for the worst years of the Depression Era...25% unemployment.

But we're not that far from the reality of 25% unemployment right now, today, in states like Michigan, RI, and California.

If the national U6 number keeps rocketing up as it has been in the last six months, it could reach 20% nationally by the end of the year. It's at 13.5% now.

A 20% national U6 number would mean a real, national unemployment rate of roughly 25%...depression era unemployment. And as I've pointed out, Michigan and other badly hit states will be at those Depression era numbers very, very soon.

If not already. The next batch of unemployment figures will be out next week. Stay tuned.