Unemployment Rate the Disparity in the Unemployment

Unemployment Rate

The Disparity in the Unemployment Rate in the United States

A recent article in the Sun Journal by Margaret Fisher (2012) has raised some serious questions as to the true state of the economy. While statistics from the department of labor assert the unemployment rate has dropped, giving the impression that the economy is in a recovery mode, Fisher maintains that this is misleading due to the fact that many people have stopped looking for jobs. When people stop looking for work and drop out of the system the unemployment rate goes down.

Currently the unemployment rate in the state of North Carolina is 1.3% lower than last year and has been steady or decreasing over the same period when it was 10.6%. By comparison the national rate has consistently decreased over the same period from about 8.9% to7.9% today.

Unemployment Rate in North Carolina as Compared to the Nation

North Carolina

National

(Fisher, 2012)

Fisher (2012) asserts that the reason North Carolina's unemployment rate is significantly higher than the national rate is due to its reliance on the manufacturing industry, much of which has been outsourced overseas. The implication for the rest of the country does not bode well. In North Carolina increased by approximately 100,000 over the past year to 4.3 million, the 5th highest rate among the U.S. states. Furthermore, the state may see an increase in the unemployment rate since it is one of six states with the highest increase of people applying for unemployment benefits.

Discussion

The current financial crisis began in September of 2008. According to an editorial in The New Millennium Times ("Why the 7.8% Unemployment Rate is Misleading," 2012) the Bureau of Labor Statistics (BLS) are misleading because while employed is defined broadly, the definition of unemployed is narrow and does not reveal the true number of individuals without work or underemployed. The BLS definition of the labor force is the sum total of employed and unemployed persons. The official unemployment rate is a simple fraction of the unemployed over the labor force. The definition of those employed, including full time and part time workers 16 and over, is extremely broad and designed to include as many people as possible within the ranks of the employed. One could work one hour a week or be an unpaid worker in a family business and be counted as employed. The definition of people who are unemployed are those 16 and over who are not employed but sought employment within the last four weeks.

This misleading reporting of the unemployment rate has left out the number of unemployed workers that have stopped looking for jobs. This number has increased significantly and the number of those no longer in the labor force has grown to near all time highs of 88,710,000 for September of 2012 ("Why the 7.8% Unemployment Rate is Misleading," 2012). At the same time the BLS counting method of removing these unemployed has artificially suppressed the number of unemployed and resulted in a misleading unemployment rate that has maintained or decreased slightly while the economy and jobs situation has deteriorated.

Since the widely publicized measures only those who are out of work and are currently looking for employment the government releases a separate number called the U-6, which provides a more complete assessment of people really out of work. These numbers are disturbing. Consider in Nevada the U-6 rate is 22.1%, up from 7.6% in 2007, while in California the U-6 rate is 20.3% and in Rhode Island it is 18.3%, more than double the 8.3 figure of 2007. The only states with U-6 rate under 10% are Nebraska, 9.1, South Dakota, 8.6 and North Dakota, 6.1 (Cox, 2012).