…by Meg White
The place Meg puts the stuff she wrote
Why the Unemployment Rate is Really Much Higher Than You Think, and Why That Matters
Categories: Commentary, Economy

A BUZZFLASH NEWS ANALYSIS
by Meg White

Conventional wisdom tells me I shouldn’t be writing about unemployment on a beautiful Friday afternoon. People want to hear about employment numbers on Mondays, so they can be reminded how lucky they are to be returning to work, or to feel in solidarity with others looking for a job.

By that measure, I most definitely should not be writing about job losses approaching levels seen during the Great Depression. But conventional wisdom might be the problem here, so I’m going to try shock therapy on for size.

What if I told you the unemployment rate last month was 14.8 percent?

Well, in a way it’s true. In another way, it might be an overly conservative estimate. While we’re wringing our collective hands now that unemployment topped 8 percent, it’s important to know where those numbers come from.

The Bureau of Labor Statistics (BLS), the agency within the Labor Department that reports on the unemployment rate, has six statistics measuring peoples’ involvement in the labor force. The U3 is the official unemployment rate, arrived at by sample surveys of approximately 60,000 Americans each month.

Furthermore, some people who are not paid are still counted as employed. A person who helps out with a family member’s business for free without getting a paycheck is counted as employed. A person who has a job but is on unpaid leave is still considered employed.

The unemployment rate may just be one of the least dependable economic indicators available. Economist Dean Baker suggested we should use employment rate, since it’s easier to count workers, who have a better-defined status in the workforce than the unemployed.

Despite its authoritative name, BLS has been a victim of political posturing for decades. Every president since at least Kennedy has fudged the country’s economic numbers to make their administration look better.

The last one to radically change the unemployment outlook was Clinton, who excised from the equation “discouraged workers” who had been frustrated with the labor market for more than one year, eliminating millions from concern in one move.

When you consider that the “gimmicking” of the federal deficit goes back to Johnson, Obama’s plan to represent the deficit in its true shamefulness is downright shocking in its innovation. Tell the painful truth about our debt? Wow. Why don’t we just come out and say how many people are unemployed while we’re at it?

The reason we don’t lies both in bureaucracy and the media. Economics reporting is quickly being revealed to be the most fraught and inaccurate available (thanks, Jon Stewart). And the media blindly reports the favored number (the U3) from BLS that is released officially each month. As a result, few truly know what an unemployed person looks like.

BLS doesn’t count unemployed people who tell the agency they scoured the want ads, who are engaged in job training, or who check Internet job sites daily. You have to make concrete, measurable steps toward gainful employment: knocking on doors, sending out resumes.

What happens when there are no unlocked doors, and no addresses to which to send one’s resume? When jobs disappear, do unemployed people become invisible?

What kind of sense does it make to spend time and sometimes money on trying to get a job if there are no jobs out there? Workers who feel this way are defined as “discouraged workers” and are not counted as unemployed by BLS.

What about the laid-off worker who took a part-time job hoping it would turn into something full-time, or just to try and stay above water until they could find something more permanent? While they might not consider themselves fully and gainfully employed, BLS’s official statistic on unemployment doesn’t make that distinction.

BLS’s U6 statistic — where I got my scary 14.8 percent stat earlier — does count these people, but as mentioned earlier, they only count discouraged workers from the past year. Anyone who’s been paying any amount of attention to this economic crisis can tell you it is more than a 12-month fling.

Clearly, while the U6 number might be a more accurate measure of national economic misery, it’s also less politically palatable. What if I told you the unemployment rate was closer to 20 percent? According to John Williams’ Shadow Government Statistics Web site, the unemployment rate is already more than 18 percent when you add back in those workers excluded since the mid-1990s.

As is pointed out here, maybe the entire idea of relying upon percentages is the problem in the way we measure the effect of unemployment:

A vastly more interesting and important comparison is of actual total human beings without jobs or who are severely underemployed. The number of people affected at the peak of the depression was 13.5 million unemployed vs. today’s official number of 11.6 million. Eleven million six hundred thousand human beings unemployed is within a dangerously short distance of the worst number the Great Depression ever printed.

Absorbing fully and unflinchingly just how bad our labor force is faring in this downturn may not seem like a fun way to spend the weekend. And my lack of economic expertise may allow you to write this whole article off as manic speculation. But the next time someone tells you unemployment today isn’t anywhere near what it was in the Great Depression, remind them that 18 percent is not that far from the 25 percent rate at the peak of the Depression, and most experts say things will get worse before they get better.

Do we gain anything from this, other than ruining our weekends? I’d say yes. If you listen to frustrated economists such as Paul Krugman, there seems to be a fair amount of foot-dragging both in Congress and the White House over what to do about this crisis we find ourselves in. Perhaps a different perspective on those same old numbers will knock them out of their Friday afternoon comas.

A BUZZFLASH NEWS ANALYSIS

Originally published at BuzzFlash.com.

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