“Real” Unemployment Rate Still Above Pre-Recession Levels

The June jobs report with its 287,000 new jobs lifted both spirits and markets drug down by the recent Brexit vote and other economic bad news. But the oft-reported numbers – jobs added and the unemployment rate – obscure the truth. In fact, the “real” unemployment rate remains above pre-recession levels.

As Peter Schiff pointed out in his most recent podcast, the numbers buried in the numbers tell a different story – a jobs market still struggling mightily even though the mainstream is in celebratory mode:

Overall, a mixed picture, but the headline number, the 287 versus 180 consensus, that’s normally the number the market trades off and that is exactly what happened.”

Scroll down to listen to the full podcast.

Peter is not the only one saying the markets and the mainstream media are missing the bigger picture. Recent analysis by MarketWatch shows the “real” unemployment rate is still up around 10%:

The 287,000 surge in new jobs in June and low 4.9% unemployment point to a US labor market that on the surface appears fully healed. Yet, those numbers don’t tell the full story about an economic recovery in which millions in the US have been left behind. Uncounted in the official US jobless rate are several million people who still want a full-time job but can’t find one. That excess level of what economists call labor-market ‘slack’—an impersonal way of referring to people desperate for work—is what gnaws at many officials at the Federal Reserve. Some are reluctant to raise interest rates until more of these people find their way into the workforce.”

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MarketWatch came to this conclusion by digging down and looking at the U6 number, which includes the total unemployed, plus all “marginally attached workers,” plus the total employed part time. This number still sits far above pre-recession levels:

In June, the U6 rate fell a tick to 9.6%, and it has fallen sharply from a peak of 17.1% in late 2009. Still, the U6 unemployment rate is significantly above pre-recession levels. In the year before the Great Recession began, in December 2007, the U6 rate averaged 8.3%. At the tail end of the 1991-2000 economic expansion, the U6 rate fell below 7%. Some 16 million people are underemployed or unemployed as measured by the U6.”

The bottom line is many people counted as employed only have part-time jobs, but want full-time employment. This is the piece of the job puzzle constantly ignored by the mainstream. Last May, we reported that this as one of the legacies of the Obama recovery: part-time work for everyone.

When the jobs report came out, the dollar index strengthened, a sign that some felt this could put interest rate hikes back into the discussion. But as Peter pointed out in his podcast, in the big scheme of things the jobs numbers don’t really matter. The Fed still isn’t going to hike rates.

I don’t care what this jobs number is. We could have created half-a-million jobs. The Fed ain’t gonna raise rates. It doesn’t even matter. So whether they revise them or not, this number is meaningless, because the Fed isn’t raising rates because of jobs. Jobs have nothing to do with it. Jobs are the excuse. The Fed can’t raise rates now because of the fragility in the banking system, all of the things that were revealed by the Brexit.”

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