October's drop in the "official" unemployment rate may seem to be a cause for celebration. It is certainly being treated that way by the administration and their echo chamber in the mainstream media. However, there are a number of facts that should temper this celebration.
First, as readers of this blog know, the official unemployment rate dramatically understates unemployment. According to John Williams's Shadow Government Statistics website, when one adds in long-term unemployed, discouraged workers, and those working part-time but preferring to work full-time--all categories excluded from the official unemployment rate--the real unemployment rate is over 20%.
Another reason these numbers should not be taken as a sign that the economy is out of the woods is that a large number of the new jobs came in retail, restaurants, hotels, and the entertainment industry. These sectors often hire extra workers for the holidays, so it is a distinct possibly that many of these jobs will be temporary.
The main reason that the new figures provide little or no cause for celebration is that the official wage rate has only risen by 2 percent, barely ahead of the ”official" 1.7 percent inflation rate. Of course, as with the inflation rate, the government understates the official inflation statistics. According to the more accurate figures compiled by John Williams using the pre-1980 means of measuring inflation, the real inflation rate is approximately 9%. Using the pre-1990 method of calculating inflation, the official rate is around 6%.
Thus, even if workers find a job, they are not finding a job that can keep up with the inflation rate. This has led to various campaigns to force employers to pay a higher minimum wage or pay a living wage. Of course, these proposals will harm workers by pricing them out of the labor market.
Instead of trying to raise wages via government fiat, those interested in helping workers should focus on repealing laws that discourage job growth, as well as those rules that make it difficult for people to start their own businesses. Of course, a movement to help workers would also focus on ending our insane boom-and-bust monetary policy, staring with letting the American people know the full truth about how the Fed benefits the big banks, Wall Street special interests, and big-spending politicians at the expense of the average American by Auditing the Fed.
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PDFTags: Inflation, Unemployment, Audit theFed