David Stockman's Alternate Look at Unemployment Reveals 42.9%

by Lear Capital EditorialJuly 30, 2015

One of the main statistics cited as a gauge of the health of the economy is the unemployment rate. In fact, employment is considered so critically important that it, along with low inflation, is part of the dual mandate of the Federal Reserve. In other words, if inflation and unemployment are both low, the Fed is supposedly doing its job. So there is a lot of pressure to keep these official numbers low. But can we trust the Bureau of Labor and Statistics to be completely apolitical and just tell the truth?

David Stockman says no, absolutely not.

David Stockman is a former budget director under Ronald Reagan. He recently revealed a very compelling way to think about employment numbers over at his David Stockman’s Contra Corner blog. Rather than thinking about workers, how about looking at labor hours? Looking at the employment situation through a different lens gives a very sobering 42.9% unemployment rate, rather than 5.5%:

“At the present time, there are 210 million adult Americans between the ages of 16 and 68—to take a plausible measure of the potential work force. That amounts to 420 billion potential labor hours, if we accept the convention that all adults are at least theoretically capable of holding a full-time job (2,000 hours/year) and pulling their share of society’s need for production and work effort.

“By contrast, during 2014 only 240 billion hours were actually supplied to the US economy, according to the BLS estimates. Technically, therefore, there were 180 billion unemployed labor hours, meaning that the real unemployment rate was 42.9%, not 5.5%!”

Could this be a more accurate way of measuring unemployment? How can they count someone who works a few hours a week as employed and still tell a truthful tale about unemployment? It is hard to get around the fact that, as Stockman points out, 180 billion labor hours are going to waste in this country. That’s astounding!

So what does that mean for you? It means that the reality is the economy is even shakier and more dysfunctional than we thought! There is still $57,000 of national debt per man, woman and child. With so few working and producing, that puts incredible pressure on the system. And yet, when official numbers insist unemployment is 5.5% that means, in effect, that our workforce and therefore our ability to repay that debt – our creditworthiness – is vastly overvalued. Maybe even more overvalued than the stock market!

As an investor, you should ask yourself if you’d prefer to invest in something that is overvalued or undervalued.

It’s all just another part of the same bubble, and yet another reason physical demand for gold is at all-time highs. If you’re ready to add gold to your portfolio, call us today.

Also, if you would like to read what David Stockman told Lear Capital exclusively about the economy and gold, click here for our exclusive report, or if you would prefer to watch a video, click here.

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