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Quelle Surprise! Unemployment Stats Don’t Capture Joblessness

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The New York Times has finally deigned to report on the fact that the Bureau of Labor’s unemployment rate (aka “headline unemployment”) does an incomplete job of capturing the proportion of the population out of work.

The article by Floyd Norris, “Many More Are Jobless Than Are Unemployed,” is less than complete. Despite its professed objective of shedding light on how the official unemployment releases understate the extent of inability to find work, the article curiously gives short shrift to explaining how employment data is captured. Nevertheless, it does provide a very useful chart that shows how what the Times calls the jobless rate, which is the proportion of the population without jobs, versus with the published unemployment rate:

In the top chart, it’s not hard to see that the gap between the two lines. Not only did has it widened since 1982, but the unemployment rate trends broadly downward while the jobless rate rises. Yet the MSM has chosen to ignore how headline unemployment paints a flattering picture of the labor market until consumer disillusionment with the economy has become acute.

From the New York Times:

The unemployment rate is low. The jobless rate is high….

Men in the prime of their working lives are now less likely to have jobs than they were during all but one recession of the last 60 years. Most of them do not qualify as unemployed, but they are nonetheless without jobs.

The unemployment rate paints a less gloomy picture. Among men ages 25 to 54 — a range that starts after most people finish their education and ends well before most people retire — the unemployment rate is 4.1 percent. That is not especially low, but it is well below the peak rate in all but one post-World War II recession.

Only people without jobs who are actively looking for work qualify as unemployed in the computation of that rate. It does not count people who are not looking for work, whether or not they would like to have a job….

In the latest report, for March, the Labor Department reported the jobless rate — also called the “not employed rate” by some — at 13.1 percent for men in the prime age group. Only once during a post-World War II recession did the rate ever get that high. It hit 13.3 percent in June 1982, the 12th month of the brutal 1981-82 recession, and continued to rise from there…

As can be seen in the accompanying chart, there has been a long-term decline in the proportion of prime-age men with jobs. That decline has been masked by rises in the number of older people with jobs and by a steady rise in the proportion of women working outside the home. But even among women there has been some slippage. The proportion of women ages 25 to 54 without jobs was 27.4 percent in March, a figure that is higher than it was during all but one month of the 2001 recession.

The negative trend can also be seen in the other chart, which shows the annual change in the number of working men in the 25 to 54 age range, using a three-month moving average to smooth the figures.

In the last half-century, that figure has turned negative only after recessions have been going on for at least a few months, although it has often stayed negative well after the recession officially ended. The lags have ranged from four months after the start of the 1960-61 and 2001 recessions, to 15 months after the beginning of the 1973-75 downturn, with an average lag of eight months. This year, the figure turned negative in January.

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21 comments

  1. Jojo

    But HOW can we (the people) FORCE Washington to give us true employment/unemployment numbers?

    The fake numbers just provide fodder for idiots like Kudlow, Dennis Neal (of CNBC) and well employed Republican’s to say everything is just fine. After all, the government says so…

  2. Anonymous

    But HOW can we (the people) FORCE people to get off their rears and look for jobs? When they find jobs, HOW can we FORCE them to work?

  3. Anonymous

    Here’s one to keep an eye on: Will the NYTimes’ articles that mention unemployment revert to using the false government statistics? Odds: Yes. It’s easier.

  4. Anonymous

    Granted that the NY Times has finally found ‘religion’ on this issue, they have also neglected to include self-employed nor contract employed into their equations, which has skewed the data they have displayed.

  5. Anonymous

    don’t know too many “contractors/self-employed” who are nearly as well off as they were when they were employed….

  6. Anonymous

    Unemployed and not looking for work? It’s called LEISURE. By all means, let’s include LEISURE activities in the unemployment stats. That’s the way to get the TRUTH!

    Argh, our government’s been deceiving us all this time! It’s a coverup, a coverup of the real leisure class!

  7. Anonymous

    These unemployed men are busy posting on internet blogs and looking at porn, which is, as we all know, the future!

  8. donna

    Look at the under 25s for the really disheartening numbers. I am sad every time I see an older person working a minimum wage job just to get health care. The kids can’t get the entry level jobs then and the experience they need to move up.

  9. Aaron

    It would be interesting to see the correlation between the increasing jobless rate and the increasing handouts through government programs(i.e. Welfare, subsidies, etc).

    Surely the two are directly related.

  10. Anonymous

    Although humans are generally excellent at pattern analysis and recognition tasks, judging the vertical distance between two squiggly lines is something people don’t do very well. Clearly the gap widens over time, and this appears to start in the 80′s. Does anyone know where I could get the two data sets (so I could plot the delta). I’m curious to know if the gap has opened gradually, or if there are discrete jumps that could perhaps be tracked back to some methodology change. The historical data I can find on the BLS site only goes back 10 years.
    blueskies

  11. Anonymous

    Does jobless mean non-productive? How many of these jobless are truly leisure, but possibly still productive (i.e. wealthy) and how many are a net negative (e.g. SSDI/medical disability, hard core unemployables, family leech, etc.)

    The slopes of the two values are unmistakably divergent. Does this represent a broader societal trend? Perhaps something structural, and not merely an economic indicator?

  12. RE

    A significant part of the divergence comes from playing with the statistics. The first major break (look at the spike) can be seen in the second graph, when the Reagan admin added the military force to the employed in 1983/84. Starting in 1994, the military was again removed but other changes (discouraged workers, etc) were introduced skewing the figure even further (check out the increased divergence from 1994 in the first graph):

    http://www.time.com/time/magazine/article/0,9171,973773,00.html?promoid=googlep

    “… In a controversial change scheduled for 1994, the Labor Department plans to redefine discouraged workers as those who are still willing to work and have at least looked for a job in the preceding 12-month period. According to John Bregger, assistant commissioner of the Office of Current Employment Analysis, the change could reduce the official number of discouraged workers by about half. …”

    There is a lot of fudging going on in the interest of reporting palatable figures.

  13. Anonymous

    So, people who don’t want to work are fulfilling their wish. And this is a bad thing?

  14. Anonymous

    Yves,

    Get over here!

    Estimates of $1 trillion are now a floor, not a ceiling, for the losses in this financial crisis…

    Nouriel Roubini | Apr 9, 2008
    As times are very busy it is sometimes easier for me to present my views as reported by the press/media rather than by writing directly. So my apologies for free riding today on this press reporting.

    As reported by the Financial Post today here is a summary of remarks I made today at an event in Toronto:

    Wall St bear may be gloomy but he’s often right
    Jacqueline Thorpe, Financial Post Published: Wednesday, April 09, 2008

    http://www.rgemonitor.com/blog/roubini

  15. Anonymous

    How many of those unemployed are in jail?

    Same category nearly, male, age 25 to 54 and That number went up a lot of the same period. It’s now, what?, 2 millions or so?

  16. Anonymous

    Before leaping to conclusions, we need to see the equivalent chart for Women. Which will show (I suspect) a trend towards less “joblessness” (as many middle-aged women have gradually left the home and entered the workforce for the past half-century).

    More women working means more men have the freedom not to work, here and there, some of the time, etc.

    This is not to say that the conclusions of the article are necessarily wrong, but the data doesn’t fully support the claims.

  17. ScottB

    Before jumping to conclusions, read the government report to know what you are talking about. You can get all of this data from http://www.bls.gov. Or, you can call up your local state employment department economist and get them to crunch the numbers for you.

    And please remember that you don’t have to file a claim to be counted as unemployed. The numbers come from a monthly 50,000 household survey. To be unemployed, you have to be actively seeking work–fill out a job application, send in a resume, network, go to a union hiring hall, etc.

    The data is consistent over time, measuring whether civilian, noninstitutionalized (non-incarcerated) adults aged 16 and older are employed, unemployed (not employed and actively seeking work), or not in the labor force. Yes, Reagan threw in the military for a couple of years, but those numbers have now been adjusted back out.

    Yes, the definition of discouraged workers was changed, but this group has ALWAYS been counted as not in the labor force, meaning not included in the calculation of the unemployment rate. People not in the labor force may be retired, watching kids, students, ill, discouraged workers, or “other”. The redefinition moved some who had self-reported as being discouraged workers into the “other” category.

    What has changed is that for men, aged 25-34, 35-44, and 45-54, the percentage that is not in the labor force has increased over time. The rates dipped a couple of percentage points from 1967 to 1977 or so, stabilized for another ten years, dipped again until 1995, stabilized again, and then slide again beginning in 2001. The labor force participation rates for women went up steadily until 2000, and have come down slightly since then.

    Participation rates for black men have declined similar to all men, except they went up significantly in the 1995-2000 period, when labor markets were tight.

    Since welfare reform in 1996, it has become harder to get/stay on welfare, and harder to get food stamps. The typical welfare family is a mom and two kids. Participation rates have dropped for almost every age/sex group in the past ten years, so there doesn’t seem to be much of a connection between the two.

    There is still the question, why are fewer men aged 25-54 employed or actively seeking work. Possibilities: early retirement dotcommers, dislocated workers who have just given up on finding a job that paid anything close to what they were paid previously, slackers living with their parents… unclear at this point what the real story is.

  18. Anonymous

    Count me in that group. I retired in my 40s, and wouldn’t go back to work if you paid me. :)

  19. Anonymous

    Well, now that’s the nut of the matter isn’t it?

    If increased ‘joblessness’ represents a whole lot of people who succeeded early and have now opted out of formal employment that would generally be considered a sign of significant and sustained wealth creation. AKA not a bad thing at all.

    But, if the majority of the difference in the trend lines represents non-productive drag on the economy then, well that is a bad thing.

    But either way, it doesn’t really say much about the veracity or utility of the unemployment rate. More like comparing a bushel of apples to a bowl of mixed fruit.

  20. Lord

    Jobs today make leisure wonderful by comparison, even if you really aren’t interested in it. Perhaps the issue should be how many are so desperate that they still work.

  21. Yves Smith

    Floyd Norris posted this in his blog::

    Dean Baker, of the Center for Economic and Policy Research, called my attention to a paper he and John Schmitt published a couple of years ago, finding that the 2000 census showed more unemployment than did the Labor Department’s Current Population Survey for the same months. The later survey provided the data used in my column today.

    Baker writes, “This gap can be explained by the fact that the Census has a much higher response rate, at near 99 percent. The CPS is under 90 percent overall, and under 70 for young black men. If the people who are not covered are more likely to not be employed (a reasonable assumption), then the CPS may be overstating employment.”

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