You can’t change an equation then compare it with the previous results. It has been called GNP (Gross National Product) and now the GDP (Gross Domestic Product). You can’t measure the unemployment rate by eliminating or adding an element of the population. Ronald Reagan added the military to his equation to lower the unemployment rate. He also took out housing from the equation to get a more desirable GNP as it was called at that time. The equation for the unemployment rate has been changed over the years. When unemployment records were first recorded the equation was, Population over 18 w/ssn compared to population over 18 w/ssn who are working. Now it is tabulated by counting the number of unemployment claims. Considering the fact the unemployment benefits only last for 3-6 months, it will eventually run out and you can no longer file, you are dropped by the wayside and no longer counted. Using the original equation the unemployment rate would be 60% or more.
It wasn’t enough to change the equation, the name was also changed (from GNP to GDP) to form an all together different strategy to fool the sheep into thinking all is well with the economy. It was changed and probably intended to sound similar to add more confusion and depending on the argument could claim different equation and different name.
Gross National Product (GNP) is often contrasted with Gross Domestic Product (GDP). While GNP measures the output generated by a country’s enterprises – whether physically located domestically or abroad – GDP measures the total output produced within a country’s borders – whether produced by that country’s own firms or not.
When a country’s capital or labor resources are employed outside its borders, or when a foreign firm is operating in its territory, GDP and GNP can produce different measures of total output. In 2009 for instance, the United States estimated its GDP at $14.119 trillion, and its GNP at $14.265 trillion.
The United States used GNP as its primary measure of total economic activity before 1991, when it began to use GDP. In making the switch, the Bureau of Economic Analysis (BEA) noted both that GDP provided an easier comparison of other measures of economic activity in the United States and that “virtually all other countries have already adopted GDP as their primary measure of production.” Therefore you can’t compare GDP before 1991 with GDP after 1991.
- In 1961, JFK removed “discouraged workers”–those folks who had quit looking for work–from the unemployment statistic.
- Under Reagan, military service was reclassified from “not in the labor force” to “employed.”
- In the 80s and 90s, according to Austan Goolsbee (yes, that one), “Congress began loosening the standards to qualify for disability payments …. and people who would normally be counted as unemployed started moving in record numbers into the disability system — a kind of invisible unemployment.”
- JFK removed “discouraged workers” from unemployment rolls, but in 1994, the Clinton administration removed them from the labor rolls. As Kevin Phillips writes, “The longer-term discouraged—some 4 million U.S. adults—fell out of the main monthly tally.”
- Beginning in ’96, the sample for measuring unemployment dropped from 60,000 to 50,000, and a disproportionate number of the dropped households were in the inner cities.
Graph taken from Kevin Phillips’ article “Numbers racket: Why the economy is worse than we know,” Harper’s, May 2008.