The Real Unemployment Numbers

The Bureau of Labor Statistics released the June unemployment numbers last week, and they were worse than expected. They were certainly worse than what the Obama administration predicted, since they were hoping that the numbers would be dropping by this time. But all that aside, what do the numbers really mean? It all sounds very precise and “scientific,” but from the very beginning of unemployment statistics, in 1878, it was a highly manipulated number. At that time, the United States was once again in a recession and many people were out of work. But Carrol Wright, head of the Massachusetts Bureau of Labor Statistics, didn't believe that there were really that many unemployed. He called the whole thing “industrial hypochondria.” (We have recounted Wright's story at Physics Envy).

In order to prove his point, he conducted a survey that would count only those who, in his opinion, “really wanted to work.” Based on this “intelligent canvas,” he determined that there was really no unemployment problem at all. Wright was rewarded for his politicized survey by being made head of the newly formed Bureau of Labor Statistics and later head of the Census Bureau. But the problems of determining who “wants to work” and who doesn't remain with us. The BLS issues six unemployment numbers, U1 through U6. The lowest is the number of workers unemployed for 15 weeks or more and still looking for work (5.1%), and the highest includes both the discouraged workers and part-time workers who want full-time jobs (16.5%). The commonly quoted number is the U3. All of these numbers involve judgments about who is in and out of the labor force.

But here's another group of numbers, also from the BLS, that give perhaps a better picture:

• Total Employable: 235.655 million

• Total Working: 140.196 million

• Total Idle: 95.459 million

• Percentage Idle to Total Employable: 40.5% (actually not working — not 9.6% unemployment rate!)

• Total Working Full Time: 112.489 million

• Total Working Part Time: 27.707 million.

• Total Not Working Full Time: 123.166 million

• Total Searching for Work (the "Unemployed"): 14.729 million

• Percentage "Unemployed" to Total Idle: 15.4%

Note that only 15% of the idle are counted as “unemployed.” Further, the percentage of those holding full-time jobs comes to only 47% or the total employable. It is quite true that not everybody who is not working wants to work full-time, or even at all. But it is equally true that the 9.6% number understates the problem.

Especially troubling is the “median weeks unemployed,” (17.9) which is much higher than at any time since they began reporting this number in 1967. This means that not only are people getting laid-off, they are not finding new jobs. The broadest measure of unemployment, “U6” (16.5%) is also the highest since they began keeping this statistic in 1994. The highest number before this recession was 11.8%.

All of these percentages appear to be a lot more precise than they are, since they are all dependent on the computation of the total labor force, and that depends on certain judgments about what percentage of the total employable population is actually in the labor force (the “labor participation rate.”) If you look at the numbers from the perspective of the total employable, only 59.4% have jobs, and only 47.7% have full-time jobs.

Peak employment came in November, 2007, at 146.67M. Current employment at $140.2M represents a loss of almost 6.5 million jobs. In the same 19 months, somewhere between 100,000 and 150,000 new workers enter the workforce each month, or between 1.9 and 2.8 million new workers. Obviously, the economy did not provide jobs for these workers.

19 months of job losses is a depression level number, and there has been no comparable period of job losses since that time.