42% Jobless Rate: Is Trump Right? ; 'Official' Number Gives Only a Partial View of the U.S. Labor Market

By Irwin, Neil | International New York Times, February 12, 2016 | Go to article overview

42% Jobless Rate: Is Trump Right? ; 'Official' Number Gives Only a Partial View of the U.S. Labor Market


Irwin, Neil, International New York Times


That number works, but only if you count retirees, college students and stay-at-home parents.

Donald J. Trump seems quite certain that the real United States unemployment rate is higher than the 4.9 percent that the Bureau of Labor Statistics has reported it to be. A lot higher.

"Don't believe these phony numbers when you hear 4.9 and 5 percent unemployment," Mr. Trump said in his victory speech after the New Hampshire primary Tuesday night. "The number's probably 28, 29, as high as 35. In fact, I even heard recently 42 percent."

Mr. Trump might be bombastic, but he's not entirely wrong. And the ways in which he is wrong are actually useful for anyone who wants to understand how to make sense of economic data.

The truth is, there is no "true" unemployment rate. There is a multitude of ways to calculate joblessness. The unemployment rate that appears widely in news reports on the first Friday of every month is a convention that has developed over the years that gives a partial -- but still useful -- view of the state of the labor market.

The Bureau of Labor Statistics itself reports six unemployment rates; the one the media most commonly cites is called U-3, the third of the six options. But people with Microsoft Excel and access to bureau and census data could dream up their own versions.

So what's in that 4.9 percent "official" unemployment rate? The numerator is Americans who are unemployed -- the people who told a survey taker that they do not have a job but want one and have actively sought a job in the last four weeks. There were 7.8 million people in that category in January. The denominator is the total labor force, meaning people who either have a job or are looking for one; there were 158 million of those people.

It's easy to see how you can get to a much larger unemployment rate if you change your definition of either of those numbers. Take the Bureau of Labor Statistics' broadest definition of unemployment, known as U-6.

U-6 includes not just those 7.8 million people who have actively sought work in the last four weeks, but also millions more who told a survey taker that they wanted a job and had looked for one in the last year, including those who say they're discouraged by economic conditions, along with people who are working part time but would prefer a full-time job. That measure of unemployment was 9. …

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