Even chairmen of the Fed, former and present, concede that today’s reported unemployment rate of 3.5 percent is statistically impossible.
By Pam Martens and Russ Martens of Wall Street on Parade.
On February 3, 2015, Jim Clifton, the Chairman and CEO of the iconic 85-year old polling company, Gallup, penned an article for his company in which he called the reported unemployment number issued by the U.S. Government “The Big Lie.”
Wall Street On Parade has now discovered that a speech by former Fed Chairman Ben Bernanke and a statement made by the current Fed Chairman Jerome (Jay) Powell, support the view that today’s reported unemployment rate of 3.5 percent is statistically impossible based on a long-held economic model known as “Okun’s Law.”
Named after economist Arthur Okun, the economic law works like this according to a speech given by the Fed Chair Ben Bernanke in March 2012:
“Okun noted that, because of ongoing increases in the size of the labor force and in the level of productivity, real GDP growth close to the rate of growth of its potential is normally required just to hold the unemployment rate steady. To reduce the unemployment rate, therefore, the economy must grow at a pace above its potential. More specifically, according to currently accepted versions of Okun’s law, to achieve a 1 percentage point decline in the unemployment rate in the course of a year, real GDP must grow approximately 2 percentage points faster than the rate of growth of potential GDP over that period. So, for illustration, if the potential rate of GDP growth is 2 percent, Okun’s law says that GDP must grow at about a 4 percent rate for one year to achieve a 1 percentage point reduction in the rate of unemployment.”
Here’s the common sense version of Okun’s Law: when there is a financial crash and millions of workers are thrown out of their jobs and businesses shut down, it is going to take a significant increase in GDP to create new jobs for those workers plus create jobs for the new job entrants coming from high school and college graduates.
But that never happened. From 2009, the year after the epic financial collapse on Wall Street, through 2018, U.S. GDP has grown at an average rate of 1.8 percent. That substandard rate has persisted despite three rounds of Quantitative Easing (QE) by the Federal Reserve; $29 trillion in secret revolving loans from the Fed to bail out Wall Street trading houses and their foreign derivative counterparties; vast amounts of federal government fiscal spending to stimulate the economy; and the massive tax cut [corporate welfare] of the Trump administration.
But somehow, magically, alongside a subpar growth rate of 1.8 percent, unemployment has shrunk from 9.6 percent in 2010 to 3.5 percent today.
This is an excerpt of what Jim Clifton of Gallup had to say about the government’s unemployment number in 2015:
“Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is ‘down’ to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.
“None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast ‘falling’ unemployment.
“There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.
“Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this.”
Everything Jim Clifton reported above is precisely correct. And there’s more, as we reported in 2017…