Real Shutdown Increases Real Unemployment by 800,000 Real Americans. Unofficially: Unemployment Rate Now 7.82%. Actually: 1.8 Million Unemployed by Shutdown; Rate of 8.48%

by L J Furman, MBA on October 2, 2013

in Connecting the Dots, Economics, Finance, Governance

Pres. Obama & Speaker Boehner

Old Picture of President Obama & Speaker Boehner

The NY Times Editorial Board describes the shutdown, here, as “John Boehner’s Leadership Failure.” USA Today wrote, here,

“This shutdown, the first in 17 years, isn’t the result of two parties acting equally irresponsibly. It is the product of an increasingly radicalized Republican Party, controlled by a disaffected base that demands legislative hostage-taking in an effort to get what it has not been able to attain by the usual means: winning elections.”

On Saturday Night Live, Saturday, 10/5/13, Miley Cyrus and the cast mock-umented the GOP celebration over the shutdown with “We Can Stop (The Government).

But Art and Politics aside, what are the effects of the Shutdown on the Economy?

The Government Shutdown increased Unemployment by 1.8 million, the Unemployment Rate increased 16.2%,  from 7.31% on August 31, 2013 to 8.48% on October 2, 2013.  At the same time, GDP growth dropped 20%, from 2.5% to 2.0%. 

The shutdown has furloughed roughly 800,000 Americans. These are real people with real families, real needs, and no real money coming in. Their real rents, real mortgages and other real bills really need to be paid. They and their children need to eat real food. Many are still reeling from losses sustained during the sequester.

The thing is, the labor force is about 154.8 Million. Since the government just put 800,000 people out of work, the number of unemployed people just shot up to 12.1 million, and the unemployment rate is now 7.82%, up from 7.3%, according to the Bureau of Labor Statistics, BLS back in August,  Economic News Release, 9/6/13, 8:30 AM.

Total nonfarm payroll employment increased by 169,000 in August, and the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and health care but declined in information.

Household Survey Data

Both the number of unemployed persons, at 11.3 million, and the unemployment rate, at 7.3 percent, changed little in August. The jobless rate is down from 8.1 percent a year ago.

Of course, the BLS can’t compute these statistics – their statisticians are among the 800,000 Americans furloughed.

According to ABC News, here, of the 158,862 Real Americans at the US Departments of Commerce, Education, Energy, Health and Human Services, and the Environmental Protection Agency, 109,916 69.19%, are expected to have been furloughed. Here’s a partial breakdown,

Furlough Data for Several Agencies
Dept of employees furloughed %
Defense 800,000 400,000 50.0%%
Commerce 46,420 40,234 86.67%
Education 4,225 3,983 94.27%
Energy 13,814 9,595 69.46%
EPA 16,205 15,592 96.22%
Health Human Services 78,198 40,512 51.81%
sub-total 958,862 509,916 69.19%
other ? 291,084 ?
total ? 800,000 ?
Table 1

It is important to note that these departments are generally regarded as “non-essential” by Tea Party Republicans. This shutdown is exactly what the far right of the Republican Party, and the people like Charles and David Koch, who fund Republican candidates, want.

In addition to the 800,000 people furloughed, according to the NY Times, here, another One Million people are working without pay. This brings the unemployment rate to 8.48%.

US Unemployment Before & Due to Shutdown
Unemployment Data Millions Rate
Workforce 154.5
Unemployed before Shutdown 11.3 7.31%
Furloughed Gvt. Employees 0.8
Unemployed and Furloughed 12.1 7.83%
Gvt. Workers Without Pay 1.0
Unemployed, F’ed and Unpaid 13.1 8.48%
Table 2

This is staggering. The United States government, which abolished chattel slavery on Jan. 1, 1863, is requiring One Million employees to work without pay.

The good news, the silver lining in this cloud, is that the Shutdown is proof of the Keynesian thesis that government actions can affect unemployment.  At the stroke of midnight, on Sept. 30, 2013, due to the actions of the House Republicans, unemployment in the United States increased by 1.8 Million people, that is, 1,800,000 people; which is roughly the combined population of Vermont, Idaho, and Wyoming, or in terms closer to home, the population of Monmouth County New Jersey, where I live, Ocean County, New Jersey, where I go to the beach, and Staten Island, New York, where I grew up.

At the stroke of midnight, Sept. 30, 2013, the unemployment rate went from 7.31% to 8.48%, by a government action.

When the “Shutdown” ends unemployment will “Magically” drop back to 7.31%.  Imagine what would happen if the members of the House decided to fully staff the agencies they decimated. Unemployment would drop by another 1.0 million people – to about 6.5%.

Series on the Shutdown.

  1. L. Furman, Popular Logistics, 9/30/13, Government Shutdown – Partial – Ok, But What’s Next? Default?
  2. L. Furman, Popular Logistics, 10/2/13, The Gold Standard, 1945 to the Recent Past.
  3. L. Furman, Popular Logistics, 10/2/13, Real Shutdown increases Real Unemployment by 800,000 Real Americans.

Larry Furman is a candidate for General Assembly  (Site / Join / Contribute) to represent NJ Legislative District 12, which stretches from Matawan to New Hanover and includes Old Bridge, Manalapan, Englishtown, Roosevelt, Millstone, Jackson, and various other towns (click here). He is also an analyst with Popular Logistics. He holds a Bachelor’s in Biology, and an MBA in “Managing for Sustainability” from Marlboro College, Vermont. He also has experience in information technology. He can be reached at ‘Larry” at Furman For New Jersey. com.

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