How Many Americans Are Really Out of Work?
A new bill aims to change the way we report unemployment.
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.