Economics

How Many Americans Are Really Out of Work?

A new bill aims to change the way we report unemployment.

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Unemployment is down! The recovery is here! Or so the Obama administration claims. Just one problem: Hardly anybody believes that the standard measure of joblessness accurately reflects current economic conditions. 

In March the month-to-month unemployment number declined slightly, to an alarming but not desperate 8.2 percent. Yet even in establishment media outlets, headline writers hedged that figure with variations on Unemployment Drops but Discouraged Workers Rise

Now a congressman wants to turn that skepticism about unemployment figures into law. In April, Rep. Duncan D. Hunter (R-Calif.) introduced the Real Unemployment Calculation Act, which would change default measure of joblessness used by the Bureau of Labor Statistics (BLS).Unemployment buffs will recognize the current "headline" number as U-3, the BLS count of "total unemployed, as a percent of the civilian labor force" 

With H.R. 4128, Hunter—who in 2009 succeeded his father, former presidential candidate Duncan L. Hunter, as the representative for the Golden State's 52nd Congressional District—would change the Bureau's headline number from U-3 to U-5, which adds up "total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force." Marginally attached persons, described in the popular media as "discouraged workers," are folks "not in the labor force who want and are available for work…but were not counted as unemployed because they had not searched for work in the four weeks preceding the [BLS] survey."

A spokesman for Hunter told me the bill has no partisan intent, and Hunter has told Fox News that "it makes me look bad too when unemployment is sliding." But it's not hard to see the one-month political gain of switching to U-5, typically about 1.5 percentage points higher than U-3 (in March it was 9.6 percent), while a Democrat occupies the White House. 

U-5 does provide data on people who have left the labor force entirely, but it's not totally clear why that measure is more relevant. "I think most economists would laugh at the idea of a politician telling them what to report," says Dean Baker, co-founder of the progressive Center for Economic and Policy Research (CEPR). 

The BLS, together with the Census Bureau, compiles monthly unemployment measures from U-1 (percentage of the labor force out of work for 15 weeks or more) through U-6 (which in addition to counting the marginally attached includes adults who want full-time work but are working part-time for economic reasons). 

Whatever the political motivations, switching to U-5 would ratify the growing popular sense that the headline unemployment number teaches us less about how robustly the economy is generating jobs than about how many people have given up and left the work force. The BLS measure of labor force participation ("labor force as a percent of the civilian noninstitutional population") has been in serious decline since the mid-1990s and now stands at a grim 63.8 percent, down from 66.4 percent in early 2007. 

"If you want a measure of how the economy is underperforming people's desire to have a job, U-5 is an improvement," says John Miller, a professor of economics at Wheaton College in Massachusetts. "But if, unlike advocating U-5, you go to U-6, you take into account people who are underemployed." U-6 offers even more anti-Obama bang for the buck. As of March, U-6 stood at 14.5 percent. CEPR's Baker also thinks U-6 deserves more attention, although he points out that all these measures are readily available at the BLS website. U-3 is just the default, so it's the one newspapers lead with. 

Unemployment figures are compiled through phone surveys, and while such surveys are far from perfect, the BLS's 26-page questionnaire tries gamely to comprehend the shifting, idiosyncratic nature of work and job searches with questions like, "How many hours per week do you USUALLY work at your other jobs?"

The result is a wide range of nuanced information, all of it freely available, about how Americans are experiencing the job market at any given time. Hunter's bill would have the temporary effect of making the headline number look worse, and undoubtedly President Barack Obama deserves the humiliation that a switch in headline unemployment would bring. (The current rate of 8.2 percent, it bears repeating, is higher than the worst-case scenario the Obama brain trust projected would occur if the $840 billion stimulus had not been passed.) But in some respects, the switch has already occurred thanks to a more informed and distributed public conversation. 

Simply put, people are less gullible about factoids than they used to be.  Talk up the purported health benefits of whole grains, red wine, or chocolate, and you'll find even your cretinous co-workers to be skeptical of the connection between studies with lab specimens and their own diets. Terms from political economy that once drew solemn attention—job creation, stimulus, recovery—have become punch lines. 

The headline unemployment figure is especially susceptible to this kind of second-guessing, because there are so many alternative measurements—including surveys of labor market dynamics, weekly jobless benefits claims, surveys by Gallup and news organizations, data on help-wanted ads collected by the Conference Board research group, and the American Staffing Association's weekly measures of temp and contract work. We are swimming in data, but hard answers to the underlying policy questions remain scarce. Why is the pace of this job recovery the slowest since World War II? Why did the spread between U-3 and U-5 widen in 2009? Why can't government planners, with all this information, do better than blunt-instrument stimulus and bailouts? 

"With a $15 trillion economy, it's still such a dynamic system that nobody could have enough data to know what part to stimulate and what part to destimulate," says Mark J. Perry, an economist at the conservative American Enterprise Institute and the University of Michigan-Flint. "It's still too complicated even for the central planners." 

Admitting your ignorance is the beginning of wisdom. Hunter's bill does not have a lot to recommend it, but it's a bracing reminder that most secrets of unemployment and job growth are unknowable.

Tim Cavanaugh is managing editor of reason online.

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  1. Does anybody try to measure the people employed in the underground economy? There are lots of people on welfare or collecting unemployment who are working long hours, just under the table for cash.

    It seems to me that this number must grow constantly as government regulations and taxes push small businesses to a cash only operation. Cash only, no deductions, no forms to file, etc, can be beneficial to the employer and the employee.

    1. Or the number of people who aren’t working, but used to be self-employed?

      Nah… why count them? The private sector is, after all, “behind enemy lines”.

      1. u mean “behind bush’s line” since recent polling shows most americans continue to blame bush moar than obama for the economy as covered by reason

        1. Just because a majority believes something to be true doesn’t make that thing true; the earth isn’t flat no matter how many people “believe” it.

          1. Don’t respond to the retard sockpuppet, dude. Just don’t.

            1. But it’s my lunch hour!

          2. in politics anon, perception IS reality.

            1. Who said this, stOOOpid?:

              Like a spy behind enemy lines, I arrived every day at my mid-Manhattan office and sat at my computer terminal.

              Hint: You get one guess, and it isn’t Bush.

        2. orrin’s really bringing the derp today.

          1. take it up w reason since i noted their reporting einstein

    2. I suspect that a substantial number of “unemployed” who are receiving unemployment welfare are working off the books.

  2. I wonder how you count “discouraged workers”. I don’t doubt that such exist but how does one get an accurate count?

    1. I don’t doubt they exist either, but I have some trouble understanding what exactly one spends their days doing if not seeking a way to make money.

      1. , but I have some trouble understanding what exactly one spends their days doing if not seeking a way to make money.

        Usually involves theft of money instead of earning it.

      2. Free games on Steam.

      3. Some go back to school, others “retire” early, others sink into depression or substance abuse (which includes the afforementioned free games on Steam). Others where it is 1 member of a household scale back their lifestyle to only 1 income, etc.

    2. It’s a phone survey, right? I think they just ask the question: “Have you looked for work within the past 4 weeks?” (or some variant). The ones who answer either “no”, “ain’t no jobs to look for”, or “it’s repudlitans’ fault dat I ain’t got work”, are labeled “discouraged”.

      1. Yet somehow I’ve never been surveyed nor have I ever even heard of anyone being surveyed.

        1. That’s because they only call 1K people. If the sample is truly random, you can get fairly good numbers, too.

      2. According to the BLS website, they ask:

        1. Does anyone in this household have a business or a farm?

        2. LAST WEEK, did you do ANY work for (either) pay (or profit)?
        If the answer to question 1 is “yes” and the answer to question 2 is “no,” the next question is:

        3. LAST WEEK, did you do any unpaid work in the family business or farm?
        For those who reply “no” to both questions 2 and 3, the next key questions used to determine employment status are:

        4. LAST WEEK, (in addition to the business,) did you have a job, either full or part time? Include any job from which you were temporarily absent.

        5. LAST WEEK, were you on layoff from a job?

        6. What was the main reason you were absent from work LAST WEEK?
        For those who respond “yes” to question 5 about being on layoff, the following questions are asked:

        7. Has your employer given you a date to return to work?
        and, if “no,”

        1. Continued:

          8. Have you been given any indication that you will be recalled to work within the next 6 months?
          If the responses to either question 7 or 8 indicate that the person expects to be recalled from layoff, he or she is counted as unemployed. For those who were reported as having no job or business from which they were absent or on layoff, the next question is:

          9. Have you been doing anything to find work during the last 4 weeks?
          For those who say “yes,” the next question is:

          10. What are all of the things you have done to find work during the last 4 weeks?
          If an active method of looking for work, such as those listed at the beginning of this section, is mentioned, the following question is asked:

          11. LAST WEEK, could you have started a job if one had been offered?
          If there is no reason, except temporary illness, that the person could not take a job, he or she is considered to be not only looking but also available for work and is counted as unemployed.

          If you don’t qualify as employed or unemployed according to this questions, then you are classified as not in the labor force.

  3. This has zero chance of passing right now. Team Blue doesn’t want to report the higher numbers, especially around election time, and Team Red doesn’t want high unemployment numbers being reported if their guy wins in November. The public isn’t savvy enough to realize the measuring stick changed and the media wouldn’t be interested in educating them if Mittens is living on Pennsylvania Avenue next winter.

  4. This is all misinformation, folks. I’ve been assured by the chairman that the private sector is doing just fine.

      1. In our hearts, ProL. In our hearts.

        1. Nothing lives in my heart, Epi. It’s a cold, black place incapable of sustaining life.

          1. I was speaking metaphorically, dude. I don’t even have a heart. But Frank can live anywhere.

            1. Where there’s a leg broken for a real or perceived slight, Frank is there. Where there’s a Hollywood executive waking up with a horse head in his bed, Frank is there.

      2. Sounds like a scam to me.

        1. The Chairman was a scam. He was actually Sammy Davis, Jr. in whiteface.

    1. So my brother-in-law says to me yesterday: “Did you know that the constitution makes the US president the head of every private corporation in America? It’s a really powerful clause, ’cause he could just take over any company he wants, but it has rarely been used before.”

      1. So did you tell him that’s the most retarded thing he ever said before or after you stopped laughing?

  5. I always check with shadowstats for the numbers. They seem to match reality more closely than the official numbers.

    Unemployment Charts

  6. Hardly anybody believes that the standard measure of joblessness accurately reflects current economic conditions.

    I’m sorry but that is a ridiculous assertion if polls showing Obama at near 50% job approval are to be believed. Maybe hardly anyone capable of thinking outside of party line thought believes the metrics, but a lot of administration dogwashers are peddling the “4-mil jobs created” line, and enough uninformed people remain in the voting public to challenge those not clinging to partisan orthodoxy.

    1. You can hold these two beliefs at the same time. “Well, job market sucks, but Obama’s trying to fix it!”

      Doesn’t mean that both beliefs would be correct.

      1. as I have said before, liberalism cannot survive without a massively uninformed and/or apathetic populace.

  7. I think most economists would laugh at the idea of a politician telling them what to report,” says Dean Baker, co-founder of the progressive Center for Economic and Policy Research (CEPR).

    Feel free to stick with U-3, then.

    1. Yeah, implying that most “economists” don’t have political motivations or aspirations is ridiculous.

      1. If Obama had an idiot economist son, he would look like Paul Krugman.

    2. “I think most economists would laugh at the idea of a politician telling them what to report,” says Dean Baker, co-founder of the progressive Center for Economic and Policy Research (CEPR).

      I’m not sure I even understand this remark. If the government is asking for figures from economists, they have every right to ask for specific reports which might give a clearer picture.

      If I’m the CEO of a company, and my sales staff keeps telling me what’s in the sales pipeline, but I’m curious to know what sales have actually been closed, then I’m going to ask for that report. If my accountants laugh at me and continue to report only what’s in the pipeline, someone’s getting fired.

  8. The other reason this won’t pass is that it will add to the deficit.

    The 2012 unemployment extensions are tiered based on the BLS unemployment rate. If they make this change, all of a sudden lots of states that have triggered off the later tiers will trigger back on, and the federal EB program triggers back on.

    That’s got to be several billion in spending, if you change the reported UI rate.

    1. So, it might get Dem support after all.

      What a dilemma: moar spending v looking bad.

      1. So they will fall back on their old method – blame Team Red for everything, regardless of their own choice of action.

      2. Wait until Black Jebus is re-elected, then he will gladly exchange “looking bad” (which he will convince the great unwashed it actually GOP agitprop) for MOAR $PENDINGZ!!11!1!1!!

  9. The current rate of 8.2 percent, it bears repeating, is higher than the worst-case scenario the Obama brain trust projected would occur if the $840 billion stimulus had not been passed.)

    Tony won’t respond to that when he starts screaming about Austerity.

  10. Its all government propaganda anyways …

    1. And most of it is coming out of the party now in charge.

      Someday, it may be the OTHER party spewing most of the propaganda, but right this minute it’s Team Blue FTW.

  11. In Europe it’s not better you know.

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  13. Unemployment Drops but Discouraged Workers Rise.

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