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How Low Is Unemployment, Really?

The unemployment rate is increasing, and news sites are celebrating the good news. Yes, you read that right—this is not insanity, and the reporters are not lying, but average Americans are still right to be confused. The official unemployment rate is vastly understating the real struggles of workers—and would-be workers—across America.

Obama touted a low unemployment rate (5.6 percent) in his State of the Union address, but working Americans know the situation is far worse than he portrayed it. As Gallup reported, “right now, as many as 30 million Americans are either out of work or severely unemployed.”

The situation is getting better—in January, the economy added 257,000 jobs, and the Labor Department even revised earlier numbers, showing that more jobs had been created than was previously thought. The unemployment rate increased from 5.6 percent to 5.7 percent not because more people are losing jobs but because more Americans are actively looking for work.

According to the Bureau of Labor Statistics (BLS), a person is not counted unemployed unless he or she is actively looking for work. This is misleading because it leaves out two groups hit hardest by the “Great Recession,” which Obama claims is now in the past: those who accept jobs below their skills and experience, and those who give up hope of ever finding a job.

According to Gallup polling, only 44 percent of Americans over 18 have a “good job”—where they work 30+ hours per week for an organization that provides a regular paycheck. Sixteen percent are “underemployed”—they work in a job below their experience and skill set or they work part-time when they would rather work full-time. Another 6.9 percent are unemployed and actively looking for work.

The rest do not have a “good job” but are not seeking better employment. This includes retirees, those who want to only work part-time, stay-at-home-moms, those adults who are in school to get a better job later, and others.

Youth advocacy non-profit Generation Opportunity calculated youth unemployment (the number of 18-29 year olds who are not working) at 14.2 percent. As many as 1.837 million of these are not counted by the BLS as unemployed because they have given up looking for work.

[pq]The uptick in unemployment means more people are finding hope and actively applying for work.[/pq]

The unemployment trend proves startlingly high among African-American youth, with 20.8 percent effectively unemployed. The rate among Hispanics is 14.6 percent and among women is 12.1 percent.

Nevertheless, the news from January does give some reason for optimism—the uptick in unemployment means more people are finding hope and actively applying for work. Americans are taking the risk that more jobs will be available, and for many, that risk is paying off.

This positive trend should not obscure the struggles of millions who are still unemployed, however. In light of this persistent struggle, President Obama’s declaration of success in the State of the Union address—and his complaint that Republicans should get with the program—proves rather unsubstantiated.

Some have gone too far, saying the Obama administration “has fabricated a hoax and continues to spin the ‘official’ statistics for their own benefit.” This is not the case—the BLS has measured unemployment in this confusing way for more than 40 years. Nevertheless, Obama’s touting this number without acknowledging the bleaker reality may be considered dishonest.

Contrary to the President’s claims, his policies have not solved our economic woes. Indeed, the “recovery” he champions has often come in the teeth of his policies.

In the last year, Texan employers added 421,900 new jobs, with a 3.74 percent annual payroll increase, almost double the 1.93 percent increase across the country. What is driving this economic expansion? Try the shale oil boom that happened in spite of Obama closing federal lands to the prospecting of oil. Texas is also ranked highly among the states in terms of economic freedom—which Obama’s progressive policies generally oppose.

Furthermore, the Affordable Care Act is imposing taxes on full-time employment that raise the cost of an employee by as much as $3,000 per year, according to University of Chicago Economics Professor Casey Mulligan. By requiring employers to provide coverage to a certain number of full-time employees, the law encourages them to fire less valuable employees or to shift them to part-time work. This drives up both unemployment and underemployment.

No, Mr. President, your policies have not brought us a recovery. More government spending and the higher taxes in your “Affordable Care Act” are not the way to recovery—free markets are. If you truly want a cause to celebrate, try the success that comes with freedom.