The “Damned Lies” that Unemployment Tells

Federal Reserve Graph US unemployment rate 2008-2021, showing COVID pandemic and post-pandemic levels

There are lies, damned lies, and statistics.

–Mark Twain

Do you ever see graphs like this one and wonder why the unemployment rate has almost completely normalized since the start of the COVID pandemic crash; and, yet, employers everywhere are griping that they cannot find enough help, and articles everywhere are reporting numerous supply shortages, blaming the shortages on there not being enough labor on the docks or in the trucking industry to move the goods or enough people working to make the goods?

I mean, look at the graph. Here we are back to unemployment levels that are even lower than they were during the scorching-hot economy right before the Great Recession of 2008-2010! Things must be booming! And many are telling us they are. We recovered to that normal level by the end of the Obama years, and we are now even below that level of “unemployment” once again to where we were during the Trump years! So, what could be so bad, right? Unemployment has hardly ever been this low! We must surely be back to full employment if we’re as good as the Trump years!

And THAT is the number everyone keeps talking about as if it actually meant a darn thing, which it does not! In normal times, when people are on the unemployment dole for a few months, get a job and then go back off of it, sure it means something. Now it truly means absolutely nothing, outside of how many people are still collecting benefits, which is a now a meaningless number in itself.

How do you reconcile these facts and numbers?

What isn’t said in this statistic and is hardly being said anywhere among all the financial reports about it (or only appears in the footnotes) for some reason is that the number of people who have fallen off this unemployment count has almost nothing at all to do with the number of people who have gone back to work! Massive numbers fell off the unemployment count when extended benefits were ended in September because, without the extensions, they no longer qualified for unemployment benefits because they had been unemployed for so long!

The second you no longer qualify for unemployment benefits, you fall off the unemployment roll. You are, thus, no longer counted among the officially “unemployed;” so, the unemployment number nosedived ONLY because a massive number of people were suddenly stripped off the benefit roll due to the extension of those benefits being terminated. It has become a statistic without meaning.

However, a vast number of them did not go back to work (I’m talking like about 15,000,000 of them), and that is why the labor-force participation rate has only recovered by half (“labor-force participation rate” meaning the percentage of those who want jobs who have jobs):

Don’t even ask me why labor-force participation rates are graphed as “last price,” because it is nonsense to call it that; but the point is, you can see how much the participation rate fell during the Covidcrisis, and you can see that it has recovered by about half. Half! Only half of the 32-million or so people who became unemployed during the Covidcrisis (when benefits were extended to all, even the self-employed who lost work) have returned to work. And that is the only number that matters.

That number, not the official headline rate the Fed most often quotes, explains why employers remain so short-staffed, even though the official unemployment number says we are fairly close to normal unemployment levels. You should ignore the official unemployment rate completely. It will only misguide you. The Federal Reserve should ignore it, too, because it is devoid of meaning under the present circumstances as a representation of US unemployment if by “unemployment” we mean the number of people who are without a job. We are NOT fairly close to normal unemployment levels if we are talking about the number of people out of work. We are only fairly close to normal BENEFIT levels.

Labor shock

The discrepancy is due to so much time having gone by since people’s unemployment status began that most people’s benefits have expired though they remain without work! I don’t know why that point is not being emphasized EVERYWHERE all the time, as it makes total sense out of the labor shortage and the supply shortages once you realize that, no, we still have well over ten-million people who were in the job force pre-pandemic who are not in it now. Think how much 10,000,000 people can produce and move! We are still FAR BEYOND ANYTHING MOST OF US HAD SEEN IN OUR LIFETIME pre-Covidcrisis for the number of people who are unemployed.

Many thought people would rush back to work as soon as extended unemployment benefits ended. I said here last summer that I did not believe that, and they clearly have not. Many reasons have been cited recently for why the labor-force participation rate has not recovered beyond a mere uptick since benefits ended in September, and I am sure all of them have validity:

  • People are afraid to go back to work because they are still afraid of getting COVID.
  • People stashed enough free Fed funds in their banks to avoid going back to work and are holding out for better conditions or better pay.
  • People have gone on to pursue entrepreneurial careers they have always wanted to try, which don’t count in the labor-force numbers. (They have been empowered to do this by free Fed funds, which they are living on and investing into their new ventures.)
  • They are right now making more money off playing their free money in stocks than they made at work.
  • The businesses people once worked for shut down for good during the COVID lockdowns, and the people who worked in them are either 1) not qualified for the other jobs in their geographical area, or 2) other jobs in their region have not emerged. Thus, they must either 1) retrain or 2) move to get a job, and neither is easy. So, they won’t until their savings start to run out; or they’ve started to retrain, but that takes time. It’s often hard to get hired in another area unless you move there first.

So, do not listen to all the nonsense the Fed spews as well as nearly everyone in financial media, which simply parrot whatever the Fed says about the economy being strong. (That’s why I started writing about economics.) The economy is still in shock. Only HALF the number of people who were FORCED out of their jobs by the government have returned to work, and we have no idea how many want to return and simply cannot readily do so. As a result, our economy is highly underproductive.

So, we see huge supply shortages, which are due to the whole world being less productive now, including the US. The entire global economy was shattered by the COVID lockdowns, and the truth is we are nowhere near back to normal!

Another way statistics lie is that companies keep telling us sales are up! Just bear in mind sales are reported in dollars not units sold. With inflation skyrocketing, a good portion of those sales increases are nothing more than higher prices, which means that part of the sales count is up solely due to our economic wreckage. In some cases, ALL of those reported sales increases are just higher prices. So, it is not necessarily the case that business is better. There may be just more money changing hands for fewer goods and services being delivered!

So, beware statistics and think them through.

How overFed are we, and shall we give thanks?

Now I ask you to take a look at another graphed statistic that may give you some insight as to where all the demand you hear the Fed talking about is coming from — presented as if the economy is so strong — when so many more people than most of us have ever seen out of work until this crisis … remain so:

US Savings from 2019-2021
US Personal Savings Rate Pre-Pandemic to Post-Pandemic | YCharts

What I really wanted to show you was a graph of total personal savings, but that is apparently a closely guarded secret because I could not find such info at the Fed or anywhere else. However, the savings rate is easily found on many sites. From that, we can infer an idea of how much money remains in savings.

As you can see, personal savings skyrocketed during the pandemic as people took all those stimulus checks and extended unemployment benefits and enhanced unemployment benefits and did with them what smart people do (not what the government or the Fed wanted) and saved them in case these times get even tougher (which they will, due to the economic destruction we created by how we responded to COVID, as I said we would only realize down the road after we reopened and saw how much of the economy did not start back up). Here we are.

So, the good news is this (not wanting to be all bleak at Christmastime): The shaded area above the red dashed line indirectly represents the total amount of money added to savings since the Covidcrisis began. I say “indirectly” because we are talking about the “rate” at which people save, which means the percentage of each pay check they are banking for the future. That percentage shot way up, even as the size of their “paycheck” also shot up during COVID unemployed (for many) due to Fed funding.

While I cannot find a record of how much money that increase in the rate at which people saved represents (information the Fed should easily have at its fingertips since it can ask all banks to report their total deposits in “personal savings”), what I can point out is the extra amount put away as represented by the shaded area must certainly be huge when compared to the amount people were putting away prior to the pandemic.

The second thing we can see — and this is the point I am working toward — is that people in aggregate have not begun to deplete their savings at all (at least in aggregate). How do I infer that? The saving rate today is exactly what it was just before the pandemic — meaning people are still putting away a little extra money out of their pay, just as they were back then. If they were not, the savings rate would have to go lower. If they were actually depleting their savings, it should go negative. It’s not, so they’re still adding to their savings.

Why is that significant in terms of understanding the labor shortage and its contribution to supply shortages and the supply shortages’ contribution to inflation (due to supply of goods not being produced or shipped because of too few workers)? It’s significant because, if people are holding out on going back to work because the Fed pumped up their bank accounts so they can wait for better conditions or better wages or can develop their own entrepreneurial ventures, many still have a lot of bankroll to sit on.

Now, again, statistics lie. This is the average personal savings rate, so it includes the rich along with the rest. It COULD be — but I don’t know how to separate that out — that all of the savings right now is happening in the top 1%, and their ability to salt money away for the future makes up for how poorly everyone else is doing.

Don’t know, but I’d say it appears likely from the information above that labor can and will sit things out awhile longer. The one good thing about the Fed’s short burst of helicopter money to the masses is that it has empowered workers to demand more from management. That’s a good thing because for the past forty years, their wages (for the same job done at the same level) have remained completely stagnant when adjusted for inflation while owner profits have soared beyond all historical comparisons going back, at least, to the industrial baron days that preceded the Great Depression.

Think wages have gone up, here is what has happened to the value of a dollar in wages due solely to the Fed’s 2% inflation target:

The bad news is that the shortages in the presence of all the new money printed and distributed to the masses since March 2020 are now creating inflation so much steeper in the downward dive of the value of your dollar that workers’ rising nominal wages are actually falling in real (inflation-adjusted) terms, too. That is more due to their lack of work creating supply and service shortages than it is due to the cost of their wages jacking up product prices (though there is some of that, too).

Shortages are the big key. People don’t pay more for goods or services just because they have more money. They still shop price in a competitive market where many suppliers of goods or services are vying for their money. HOWEVER, when goods and services are short in supply because so many fewer people are working while so many more people are buying because they have a lot more money, then people will pay a higher price to whomever can provide the goods or services they are having a hard time getting. Things get bid up by desperate buyers.

Bottom line: The shortages drive inflation. The free money fuels it. And we look likely to have both for some time to come.

A time of thanks

As we have just gone through our traditional scheduled time of thanksgiving here in the US, I want to say thank you to those patrons who have supported my writing on this site. I suspect the articles do not come as often as many patrons might like, but they do truly come as often as I can make time to write them.

At my current level of support, I am making well under $10 an hour from the writing I do on this site. So, I, of course, MUST do other writing and/or other work that pays better. But I give all the time to this topic I can, and I post everything I write that is related to economics here, even if only tangentially related, so you can find it all in one place.

At a level under $10 per hour (the actual rate depending on how much time I put in each week), this is clearly a labor of love with time essentially donated on my part, too. That love isn’t the kind that finds it such fun; it is that I think this is one of the most important topics we’ve faced since the Great Recession and one poorly handled in the mainstream media. It has only grown more serious since Covidcrisis and is now getting much more serious and is, I think, even more poorly understood by the mainstream media.

I keep soldiering on because I keep thinking it is important, not because I’m making good money at it or cannot find anything more fun to do. And I keep thinking it is important partly from my own internal reasons but also because I see people are willing to support it. In all truth, if the level of support dropped much below where it is, I’d quit because I’d say to myself, “Why do I keep doing this if so few people find it worth even a buck a month?” Money is, after all, especially on an economics blog, one big measure of how much we value things.

At the same time, I understand fully that in these vaccine-mandate, covid-crash-and-recrash, high-inflationary, high-unemployment, forced-unemployment times, people’s financial circumstances may have worsened so they just cannot continue with their support. No hard feelings at all to those who have dropped support and indicated that was their reason. In all, support is now back to where it was before the crisis.

I know I don’t say it as much as I probably should, but I appreciate the people who make donations, particularly as an encouragement and a vote of support. While some may wish their donation would result in my writing more, just know that without it, I would not write at all on this topic … because there are a lot more fun things to write about, and I get paid more from publishers for writing other things. Your donations are my only available gauge (outside the occasional comments below) of how much these thoughts on economics are worth to people. Even the $1-for-your-thoughts people are saying, “I want to, at least, encourage you to keep it up.”

So, thank you for making your encouragement real. Please feel free to leave feedback on what you think could or should be better or what bothers you or what you like. I know right now the site is a little broken in that it started insisting about a week ago on putting whole posts in some cases on the home page, in stead of excderprts, and I’ve tried for a few hours to fix it but cannot find what is wrong. I’m hoping it’s a WordPress glitch since it began about when their last software update came along, so I’m waiting at this point to see if it corrects itself.

I don’t see people commenting much anymore, and I hope that isn’t because the Disqus comment section isn’t working. I know Disqus no longer works at notifying me when comments are posted, even though it is still set to do so. So, if you are unable to comment, please send me a note at my site email address ( postmaster AT ) … unless you are one of the three people banned from posting here due to endless “misrepresentations,” in which case your email will also be blocked, so why waste your time unless you just need to vent into a vacuum? In which case, by all means vent your spleen into the vacuum of space.

Thank you, and I hope you all have a good Christmas season. (Bear in mind I write politically incorrect from my own persuasion or beliefs, but I am equally hoping you have a wonderful Hanukah/Ramadan/Kwanzaa/Solstice/whatever kind of December; and I will accept a happy-whatever as well as a merry-Christmas in the spirit in which it is meant. If only we all could just continue to do that–respecting that we are in the struggle together and can all make each other’s lives better, not worse, regardless of politics–it might be a more peaceful New Year.)

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