Is the Official Unemployment Rate Really Misleading?

unemployedA recent data analysis from Gallup took more than a few swings at the decreasing unemployment rate, calling it “extremely misleading.” It’s a critique that’s been made before many times, but there are some fair points worth remembering if you take the unemployment rate from the news or from the Obama Administration without looking at any of the Bureau of Labor Statistics (BLS) reports. However, while the critique of the deceptive simplicity of the 5.6% unemployment rate taken at face value is understandable and informative, the overall analysis is incomplete.

Gallup’s Jim Clifton goes through and notes the data not included in that unemployment number: Discouraged workers, part-time or underemployed workers, and workers with only short-term jobs that will end and leave them unemployed once again. “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie,” writes Clifton.

The term “lie” is arguable, but certainly he’s correct to label it misleading and incomplete — only a part of the picture. What he doesn’t do is outline the specific numbers that are missing, nor does he look at the trend in those numbers. And when you make a critique on what numbers are included used in the official “unemployed” percent, it’s important to be clear about whether or not this changes the fact that unemployment — across definitions — is said to be improving. After all, his critique mentions Wall Street, accurately pointing out that “the cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.”

This suggests that the job market isn’t making a comeback, that being active on the market might not be a good idea. Which isn’t strictly true, and that’s why we’re going to examine data on discouraged workers (i.e., those who stopped looking for a job because of the poor economy, and thus were not counted as unemployed anymore), part-time and underemployed workers, those who lost their jobs or completed jobs that were only transitory, and look at how these numbers have changed. Because depending on how you define unemployment, it is certainly worse than the 5.6%, and taking that number at face value would be a mistake. But that doesn’t mean there isn’t good news.

Job losses and temporary job completion

According to data from the BLS, the number of individuals who lost their jobs fell from 3.192 million to 2.340 million between December of 2013 and December of 2014. In that same span, the number of individuals who completed their temporary jobs — thus becoming jobless once again — fell from 1.159 million to 980,000.

Discouraged workers and long-term unemployed

Long-term unemployed, or those without jobs for 15 to 26 weeks, or 27 weeks and above, dropped from 1.619 million to 1.229 million and from 3.753 million to 2.693 million respectively between December of 2013 and December of 2014. The BLS also shows the number of total unemployed in addition to the number of discouraged workers “as a percent of the civilian labor force plus discouraged workers.” Seasonally adjusted, this percentage dropped from 7.2% to 6%, as seen on the BLS table below (which shows decreases across the board).

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If it was merely a matter of unemployment seeming to shrink because people were dropping out of the job search rather than finding employment, you’d see that decrease in unemployment tied to a subsequent increase in discouraged workers, which is not the case.

Part-time or underemployed

Underemployment is a huge problem for many Americans. Just because they’ve successfully found employment doesn’t mean it’s enough to provide a living wage, or support a family on only a few hours of work a week, or a few hours of work in a number of different jobs. According to the BLS, between 2013 and 2014, the number of unemployed individuals looking for full-time work fell from 8.655 million to 7.249 million. The number of individuals who are employed, but working part-time for economic reasons dropped from 7.99 million to 6.97 million from December of 2013 to December of 2014. The number of individuals who are working part-time because it was the only type of work that they could find fell from 2.579 million to 2.377 million in the same time period.

The problem of underpaid individuals is a whole other issue, one exacerbated by underemployment. If a struggling worker can get overtime, or log a solid 40 hours, poor pay can be offset by hard work. But if employers don’t offer that opportunity, low wages become unlivable — something politicians on both sides of the aisle and across the country appear to be in agreement on, even if they don’t agree on a solution.

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