Unemployment Rate: What Is It and Does It Really Matter?

December 9th, 2011
in Op Ed

by Frank Li

unemployment-line-2Last Friday (December 2), the top business news was this: “Unemployment Slips to 8.6% as Private Sector Adds Jobs.” I found it misleading and here is why:

(1) It is my understanding that we must create 125,000 jobs per month just to keep up with the population growth in the workforce. In November, the private sector created 120,000 non-farm jobs, which means that the real unemployment rate should have gone up, especially given the rise of new weekly jobless claims above 400,000!

(2) It is also my understanding that the current method of calculating the unemployment rate is severely flawed (“Q&A: A look behind the drop in the jobless rate“). But still it should not have been so imprecise as to be off by about 0.4%, or about 500,000 jobs! Have all those some 500,000 unemployed people stopped looking? If so, shouldn’t that be the top news story?

Follow up:

While I agree that creating 120,000 non-farm jobs in November was good news, I was troubled by the following news on the same day:

(1) The media headlines shouted: “Unemployment rate drops to lowest since 2009”!

(2) President Obama hailed at the news.

I doubt the media and President Obama are deliberately misleading the public, knowing that (1) our method of calculating the unemployment rate is severely flawed and (2) the overall situation in America is no better now than in 2009, in almost all aspects, from unemployment, to job prospects, to poverty, to debts and deficits (national, state, and local)! Unconvinced? Click this (Meet the Jobless in Iowa), or this (College Graduates Face Record High Debt in the Age of Record High Unemployment), or this (Hidden America), or this (Santa finds kids giving shorter lists in recession). Need you read more?

Why so doubtful? Because neither President Obama nor the media can be trusted for two main reasons:

(1) President Obama has been doing his job as President for one primary purpose only: getting himself re-elected, with everything else being secondary, including the long-term well being of the country! Just to be fair, President George W. Bush acted the same way during his first term. More broadly, because re-election is most important to them, most American politicians simply can’t get their priorities right! It should be country first, constituents next, and personal agendas last. But in reality, they have them completely reversed! Still wondering why and how America is so deeply in trouble? Wonder not! It’s the political system, stupid!

(2) The American media, especially the established and for-profit ones, pander to the politicians. Two examples:

a. Together with the politicians, the media have created a perception (and de facto reality) that jobs are the #1 problem in America. I disagree! It’s a symptom, not a diagnosis! I believeAmerica’s #1 problem today is not jobs per se. Rather, it’s the debts and deficits that are leading the country toward bankruptcy. Therefore, America must be restructured, as in business, getting its fiscal house in order first before anything else, such as hiring (= jobs).”

b. The media failed to question the insanity behind the launch of the Iraq war, which is so consequential that I believe it “will eventually be marked as the beginning of the end of democracy as we know it.”

Now, let me answer the two original questions:

(1) Unemployment rate: what is it? The real unemployment rate is definitely above 15%. We need a new method to more truthfully reflect the reality!

(2) Unemployment rate: does it really matter? Yes, it does! Because people are suffering. Even so, it’s not as important as the long-term survival of our country!

America is deeply in trouble! Everything will get much worse before it becomes better, including the real job prospects, which, according to Christine Romer, former Chair of the Council of Economic Advisers for President Obama, “could take 40 years”. Why are we so deeply in trouble? Because our problem is structural and years of excessive spending have finally caught up with us! Yes, it’s payback time - either we pay now or our children will pay later at a much higher price! Any doubt? Look at Europe.

America is deeply in trouble! If someone gives you an easy solution, don’t trust it! Want a real solution? Introducing term-limits for the top political offices, starting with 1-term (e.g. 6 years) for the American Presidency! For more details, read my diagnosis and solution!

Finally, here are three profound questions for you to answer:

(1) Does it matter to you who the President is?

(2) Who can you still trust in American politics?

(3) Will your children be better off than you, if we stay the course?


Read more articles by Frank Li

About the Author

Frank LiFrank Li is the Founder & President of W.E.I. (West-East International), a Chicago-based import & export company. Frank received his B.E. from Zhejiang University (China) in 1982, M.E. from the University of Tokyo in 1985, and Ph.D. from Vanderbilt University in 1988, all in Electrical Engineering. He worked for several companies until 2004, when he founded his own company W.E.I. Today, W.E.I. is a leader in the weighing industry not only in products & services, but also in thought and action. Dr. Li writes extensively and uniquely on politics, for which he has been called "a modern-day Thomas Jefferson" (see page 31).

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