The Drudge Report is linking to a Washington Examiner column by my old pal Paul Bedard that features this astounding insight from a financial pro:
Don’t believe the happy talk coming out of the White House, Federal Reserve and Treasury Department when it comes to the real unemployment rate and the true “Misery Index.” Because, according to an influential Wall Street advisor, the figures are a fraud.
In a memo to clients provided to Secrets, David John Marotta calculates the actual unemployment rate of those not working at a sky-high 37.2 percent, not the 6.7 percent advertised by the Fed, and the Misery Index at over 14, not the 8 claimed by the government.
Here is the headline: “Wall Street adviser: Actual unemployment is 37.2%, ‘misery index’ worst in 40 years”. Now what sort of mathematical and economic wizardry did Marotta use to arrive at the “real” unemployment rate of 37.2%? Prepare to have your mind blown as I reverse engineer his sophisticated calculations.
Marotta went over to the Bureau of Labor Statistics web site and found the current labor force participation rate, which is 62.8%. That number represents the share of the adult, non-military, non-jailed population who have a job or are actively seeking work.
Then Marotta subtracted that number from 100. That’s it. 100 – 62.8 = 37.2. Voila! Since 37.2% of the civilian, noninstitutional population is neither employed nor actively seeking working, then are “unemployed.” Hey, that’s even higher than the unemployment rate during the Great Depression! Doom! Gloom!
But wait, isn’t Marotta including as “unemployed” people who really aren’t in the job market such as retirees and college students and stay-at-home moms — as well as discouraged potential workers? He sure is — which is why the 37.2% number is absolutely ridiculous and tremendously overstates labor market weakness. A total joke. Using Marotta’s “logic,” maybe the “real” unemployment rate is merely the share of of the civilian noninstitutional without a job. That comes out to a whopping 44.5%! The Greatest Recession!
Now the current unemployment rate probably does understate job market weakness because of the sharp decline in the labor force participation rate. But there is lots of debate as to how much of that LFPR decline is due to demographics and how much is due to anemic labor demand. Maybe the “real” unemployment rate is 8% or 9% or 10%. But anyone who tells you it’s nearly 40% is selling the apocalypse. Indeed, Bedard notes that Marotta “recently advised those worried about an imploding economy to get a gun.” What’s more, I am guessing his take on the “real” inflation rate is similarly dubious. Drudge and the Examiner are pretty widely followed on the right. I hope this 37.2% number doesn’t metastasize into a GOP talking point. That would be embarrassing.