The decrease in the participation rate in the U.S. economy has left our understanding of what the real unemployment rate is a little cloudy. The latest unemployment report showed huge revisions, but little reality, as to where we really stand.
Albert Edwards of Societe Generale has put together this chart to provide a little context. It shows what the U.S. unemployment number would look life if we were at the peak participation rate of 67%, which occurred around 2000.
At that participation rate, unemployment would be about 4 percentage points higher than the current headline figure of 9%. Edwards says that 4% is the equivalent of 6.7 million more unemployed people.
So if the participation rate increased 3% (from its current 64% to 67%), unemployment would actually be 13%. That gap is partially made up of long-term, structurally unemployed construction workers left behind after the housing bust, and is a significant number.
From Societe Generale:
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