_____One Big Problem in the USA is the Official Unemployment Figure_____

The US Census Bureau keeps detailed labour force data by city. However, the official unemployment figure is not reliable because in the modern situation people drop out of the labour force. There is thus very probably much higher unemployment in the USA than what is reported. It turns out the labour force itself varies as a percent of the population. It varies by region and in the same place it varies with the business cycle. The missing element is hidden unemployment which is excluded from their survey. This is always a problem and the world over statisticians never just report the unemployment figure alone rather they report the labour force level in the adult population, that is they report the adult participation rate. Adults in the labour force are the people working but also the unemployed people actively looking for work. You are only officially unemployed if you say you are definitely looking for work in the telephone survey. And this is not a good measure as some people turn to other things for several years. While the participation data is available the world over it is not used much.

The question is what is the real unemployment - that is what is the natural-rate-of-participation given that there is almost always some hidden unemployed. A good benchmark is: What is the participation rate in the few cities that approach full employment? It’s not likely that there’s variation as you have to be financial independent not to work ever. Below is the estimated real unemployment in American cities based on the standard of the best cities.

Technical notes. I used the figure of 72% participation as the best performance. There are cities in the USA, the UK, Australian, New Zealand and Canada at this level. This is startling and very important, as it’s happened in all cases of good economies. That is in all five of these countries the labour force went above what is normally considered full employment by economists because of a good economy. It would therefore be a reliable analytical technique as a result. The three American cities listed below are actually near 73% but they have slightly younger populations. The number of people over 65 is a correction to the data that has to be made. People over 65 tend not to work at this time. There is a delay to the hidden unemployed reentering the work force for years at a time so the benchmarks has to be cities that have had good economies all along. Washington, D.C. is an example of a very large city with a high employment level, more or less the target you want to reach.

These figures are different from the Bureau of Labour Statistics unemployment indicator U6 which is some 12.2% nationally. The main difference is BLS adds in the involuntary part-time workers, a whopping 4.6%. It’d make more sense to prorate that figure by something like 40%. I have not done this adjustment.

The Bureau of Labour Statistics also tries to capture the hidden unemployed, calling them marginally attached to the work force. Their table A-16 gives this as 2.5% while the best cities method I use indicates there’s really 10% people in hidden unemployed in 2011, people doing other things for a few years.

I live in Canada and in the deep recession of the 1990s at the peak of the unemployment 25 of the 25 surveyed cities had 50% to 100% of the increase in unemployment go to hidden unemployment. In no instance did the official unemployment figure catch as much as half the increase in unemployment. The official unemployment figure had zero meaning in 100% of the data. Statisticians use the similar measurements of unemployment around the world, a United Nations Standard

___________USA 2006 Unemployment ----10 Largest Cities _________

.*****************************************************

                               Best Cities Benchmarks (from peak of 2005)

City­­_______________Official_________Adults in_______Estimated_______Age

________________Unemployment____Labour Force__Real Unemployment__65+

__________________Percent__________Percent_________Percent____Unemployment

____________________________________________________________Adjustment

Madison_____________3.6____________74.9___________(same)_____(-2.9)

Des Moines­­­­__________4.2____________74.3___________(same)______(-1.9) Minneapolis__________5.3____________74.6___________(same)______(-3.1)

.******************************************************

­­­­­ Real Unemployment Based on 72% in Labour Force of Best Cities 2006

New York City________6.5_____________64.1____________16.4_____(-0.4)

Los Angeles__________6.1_____________65.2____________17.1_____(+2.1)

Chicago______________7.5_____________67.6____________14.9____(+1.7)

Washington___________4.6_____________72.3____________7.6_____(+3.4)

San Francisco__________6.0_____________66.5___________13.8_____(+0.6)

Philadelphia___________6.8_____________66.0____________15.3____(-0.6)

Boston_______________5.4_____________68.4____________10.3_____(+0.2)

Detroit_______________10.5_____________64.5___________20.2_____(+0.4)

Dallas________________6.7_____________70.7____________13.3_____(+4.9)

Houston______________7.3_____________68.2____________17.2_____(+5.0)

Weighted average age adjusted participation of three best cities is 71.67% (calling it 72%)