Magazine article Reason

How Many Americans Are Realty out of Work? A New Bill Aims to Change the Way We Report Unemployment

Magazine article Reason

How Many Americans Are Realty out of Work? A New Bill Aims to Change the Way We Report Unemployment

Article excerpt


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% 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 mid1990s 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. …

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