A Wall Street adviser in a recent memo to his clients said that the “actual” unemployment rate in the United States is 37.2 percent.
Obviously, this has many asking whether this is indeed the case. In short, it isn’t. But of course this requires some explanation.
David John Marotta’s memo, which was picked up by the Washington Examiner, stated that unemployment is much worse than what is being reported by the federal government.
Marotta’s claim is based primarily on the Bureau of Labor Statistics’ data on the current labor force participation rate, which is about 62.8 percent:
The above graph represents the adult, non-military and non-jailed population that is currently employed or actively seeking work.
But how did Marotta arrive at that 37.2 percent figure? Simple: He subtracted the current labor force participation rate from 100 (“100” representing full labor force participation), AEI’s James Pethokoukis reported. If the current labor force participation rate is 62.8 percent, then that means 37.2 percent of the civilian, noninstitutional population is “unemployed.”
Obviously, this does not give us an accurate calculation of unemployment.
Marotta in his calculation includes everyone: Retirees, adolescents, college students and stay-at-home mothers. In other words, he includes people who would ordinarily be excluded from what we refer to as the labor force.
The Wall Street adviser’s figure “is absolutely ridiculous and tremendously overstates labor market weakness. A total joke,” Pethokoukis said in a fiery blog post. “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%!”
Now this isn’t to say that the official unemployment rate, which currently rests at 6.7 percent, doesn’t seriously understate the reality of the unemployment situation in the United States.
Indeed, as noted every month by TheBlaze, the U-6 unemployment rate, considered a broader measure of actual unemployment in the U.S., regularly posts a much higher figure than the “official” unemployment rate.
The U-6 rate, which includes not just the unemployed, but also the underemployed and the discouraged, currently sits are around 13.1 percent.
So although it is absolutely accurate to say that the commonly reported figure on unemployment in the United States regularly downplays “real” unemployment, saying that the “actual” unemployment rests somewhere around 37 percent is highly — dubious.
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This post has been updated.