Delusion of Phantoms

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Charles Hugh Smith discusses phantom unemployment--one of the many phantoms perpetuated by the federal government. As he notes, "it is obvious that the unemployment rate should be calculated on the total work force (those of working age 18-65 who are not institutionalized or permanently disabled) and those with real jobs, i.e. ones that generate enough income to get close to the poverty line."

The calculation would look like this:

unemployment rate = (# of working age people - # working age people with income above poverty line)/# working age people

We could make it even more general by taking out age qualifications:

unemployment rate = (total # number of people - those working) /total # of people

The idea is to estimate the fraction of all people actually producing. The higher the fraction, the greater the production. The greater the production, the higher the prosperity.

Of course, the federal government does nothing of the sort. It strips out various categories of people not working, such as the 93 million estimated as 'not in the labor force.' With 120 million currently estimated as in the labor force, one can see how high the unemployment rate would shoot if we put those 93 million back into the denominator. Can you say Great Depression?

It seems that we prefer the delusion of phantoms. Phantom GDP, phantom inflation, phantom recoveries, phantom unemployment.