Guess What? Unemployment's Really at 16.3 Percent

by John Lott who is an economist and author of "Freedomnomics."

How is it possible for the unemployment rate to essentially remain unchanged when 247,000 jobs have been lost? Because the number of people who gave up and stopped looking for work rose dramatically. ....

.... If we include the normally counted number of unemployed as well as those who have recently given up looking for work and those who have taken a part-time low paying job because they can't find full-time work, the implication is that the unemployment rate for July would be at 16.3 percent These discouraged workers will again look for work once the economy starts to improve, but this 6.9 percentage point gap between publicly discussed unemployment rate and these discouraged workers is unusually large.

The changes in unemployment also mask the large drops that are still occurring in private employment -- construction, manufacturing, retail trade, and professional and business services all suffered large declines. The two of the three areas where employment has increased are government related, either education and health services or general government employment.

These changes do coincide with what is happening with GDP. During the second quarter the private sector kept on shrinking at an annual rate of 3 percent. Overall, GDP declined by "only" 1 percent at an annual rate, but that was because real federal government consumption expenditures and gross investment soared by 11 percent. Real state and local government consumption expenditures and gross investment increased, too, but by a more modest 2.4 percent. ....