Unemployment Rate? 7% or 13%? It Depends

Love Yourself Some Treasuries - Bloomberg: "The Fed has said it wouldn’t raise its federal funds rate until the unemployment rate -- now 7 percent -- comes down to 6.5 percent. That target is becoming less meaningful, however, because the decline in joblessness has been primarily the result of a falling labor participation rate, not rising employment. If the participation rate hadn’t dropped from its February 2000 peak because of the retirement of members of the baby-boom generation, discouraged job-seekers and youths who have stayed in school during the recession, the unemployment rate now would be 13 percent."

So now liberal progressive economists like Paul Krugman are in a real quandary -- they want Obama to look good by having a falling unemployment rate, and the statisticians in Washington have done everything they can by redefining unemployment as excluding  the long-term unemployed and discouraged workers from those classified as unemployed (hence a real jobless rate of 13% becomes 7%). Yet they do not want the Federal Reserve to start tapering and raising interest rates -- something that is a real possibility now that the official unemployment rate (7%) is only a half of one per cent from the target (6.5%) to start doing exactly that! So what to do?

If the liberals from inside the beltway to the New York Times were honest, they would tell the American people the truth -- the real unemployment rate is about 13%, the Obama recovery has been dismal, and tapering and raising interest rates by the Federal Reserve is way premature.

But how they spin it from here into 2014, is anyone's guess.

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