A Note on Unemployment Statistics

I tried unsuccessfully to tune out Fox News blaring in the diner where I had breakfast yesterday. With some characteristic outrage, host Megyn Kelly reported that the 9.5% unemployment rate does not even include those people who have been jobless so long they've exhausted unemployment benefits--an error repeated minutes later by a FOX economic correspondent. One could argue from many angles that 9.5% underestimates the number of jobless, but the figure has nothing to do with the number of people collecting unemployment. Read on for a brief outline of the methodology the Department of Labor uses to calculate the unemployment rate.

Every month, in the week that includes the 12th, the US Census Bureau conducts a survey of 60,000 sample households across the country.

Members of any sampled household older than 16 who don't have a job and are not looking for work are not counted as part of the 154 million estimate of the overall available labor force. That would include anyone who hasn't made an active effort to seek employment in the four weeks prior to the survey, even if they've been laid off and looking for new employment so long that they've become discouraged and given up the search.  Daniel Indiviglio wrote something more about "discouraged workers" on this site last week.

If in the week prior to the survey a respondent has had more than one hour of paid employment, or has performed more than 15 hours of unpaid work, they would not be counted as unemployed. So, for example, a 45-year-old laid-off business executive I met last week, who had started mowing his neighbors' lawns and doing odd jobs for cash because he needed money to have his car repaired in order to go on any interviews for a full-time job, would be counted among the employed members of the labor force.

Also, because the US Census Bureau surveys "households"--a concept disrupted by the roiled economy--their methodology does not take into account those made recently homeless as a result of unemployment. Further, the broad distribution of their sampling does not sufficiently gauge the depth of joblessness in regions where the downturn has been so dramatic that it has created a geographic concentration of households with two, three, or four families crowding under one roof.

So I think it's fairly evident that the national "unemployment rate" produced by the Department of Labor's Bureau of Labor Statistics represents a low-end estimate of reality. But that results from methodological shortcomings of the US Census Bureau's monthly Current Population Survey, not from any skewed counting of the number of people collecting unemployment.