I know everyone likes a conspiracy. Obviously, hedge funds manager Kyle Bass appears to infer the government is the Bureau of Labor Statistics (BLS) ‘semi-rigged’ the unemployment statistics. In an interview on CNBC Squawk Box interview, Bass says that an improved unemployment rate is deceptive. He expects that the unemployment rate might even drop further, but it will be misleading because it will be a result of people dropping out of the labor force rather than jobs being created. While he might have a valid point, it is incorrect to suggest that the government does not track ‘true’ unemployment.
Economists recognize that the ‘true’ unemployment rate not only tracks those currently looking for a job, but those that want a job and quit looking due to being discouraged. This is measured and is located in Table A-15 of the monthly job report, thus not hidden from the public. Unlike his claim that the true unemployment rate is 11 percent, this alternative measure of unemployment is actually at 12 percent. Now before giving Bass praise for pointing out a supposed weakness in the unemployment rate, it should be noted that this figure has been steadily dropping over the last year. In fact, it has dropped substantially from the last year when it was 13.6 percent. Since the end of the recession in June 2009, we have recently seen a steep decline that suggests the job market is improving.
This alternative measure of unemployment looks at the following:
- Unemployed and currently looking for work
- Marginally attached to the labor force, meaning that they are no longer looking for work, but want a job and have searched for a job within the last 12 months. (Note: We consider this to be the discouraged worker)
- Working part-time for economic reasons. (Note: Would like to work full-time, but cannot find full-time work. Therefore, it does not include part-time workers by choice, such as college students who only want to work part-time so that they can go to school full-time.)
Having said that, it is obvious that the jobs picture is not perfect. Even though part-time employment has declined over the last year, it still remains highly elevated from the pre-recession period. Also, wages also remain stagnant. In my opinion, the main problem is a changing landscape of the economy where we are seeing a shift from value in using our hands (manufacturing) to using our minds (services). Right now, we are in a transitional phase with plenty of low-paying, low skill jobs and many high-paying, high skill jobs. The problem is there are not enough decent paying, middle skill jobs. Until these workforce skills are updated, wages will remain stagnant.
While it makes for good TV, do not be fooled with this faux conspiracy.