Trump is Right: Real Unemployment is 40%

By Joe Guzzardi
December 9, 2016
As seen in: 
DC Patch
Victorville Daily Press
Times Daily
Desert Dispatch
Daily Press

President-elect Donald Trump has promised to get jobs back to Americans. A look at the most recent jobs report from the Bureau of Labor Statistics shows that Trump faces big challenges.

Every month, the financial news focuses on the BLS headline-making figures, but leaves the more telling data for Wall Street analysts to dig out. The November report, for example, showed that the economy created 178,000 nonfarm payroll jobs, a mediocre number, and that the official unemployment rate dropped from 4.9 percent to 4.6 percent. Since 5 percent has been the traditional guideline rate to determine full employment, many government economists have applauded President Barack Obama for bringing the nation back from the brink of financial disaster.
                                                                                       
But last month, the working-age population increased by 219,000. The 178,000 job creation total doesn’t keep pace with working-age population growth, a very bad indicator. Meanwhile, the size of the labor force, defined as those working or actively looking for work, dwindled by 226,000. And in a particularly ominous sign, the total of 18-to-64-year olds not in the labor force reached nearly 49 million, about 52 percent of that demographic. For younger millennials, not working today often means not working later in life either.
 
A key indicator, the labor force participation rate, remained near its 40-year low, 62.7 percent. If only 62.7 percent are in the labor force, then 37.3 percent are out of the labor force which means that Trump’s “false economy” claim that he made in the summer is, at least on one level, correct. In June, Trump told CBS on “Face the Nation” that the real unemployment rate is about 40 percent. Many other variables must be considered when interpreting the labor force participation rate’s meaning – early retirements, voluntary opt outs and welfare’s lure. But still…95 million is a huge number no matter how it’s crunched.
 
Another Trump pledge is that he will create a sensible immigration plan that will work on Americans’ behalf. Coincidentally, during the lax enforcement of the Obama administration, the jobs shortage can be linked to immigration increases. According to the alternate Household Survey that includes legal and illegal immigrant statistics, in November native-born employment fell 89,000 or 0.7 percent, while foreign-born employment rose 249,000, 0.96 percent.
 
Apply the same Household Survey data to Obama’s two terms, and the results indicate an even more favorable pattern for the foreign-born. Immigrant employment increased 4.6 times faster than American employment, 20.8 percent versus 4.5 percent. Dating back to 2000, government statistics show that all the net employment increases have gone to legal and illegal immigrants, even though native-born Americans accounted for two-thirds of the increase in the working-age population.
 
These numbers may shock some, but not immigration experts. The 1965 Immigration and Nationality Act’s effects have come home to roost in the form of millions more workers added to the labor pool during a sustained 50-year period of fewer manufacturing jobs created, more outsourcing and more automation, all of which have led to four decades of wage stagnation.

Trump has a chance to accomplish two objectives at once. By limiting legal immigration, Trump would also loosen the labor market which would mean more American jobs opening up. 
 
Joe Guzzardi is a Senior Writing Fellow with Californians for Population Stabilization. Contact Joe at [email protected] or on Twitter @joeguzzardi19.