Jobless rate tells only one part of story on economy

Monday, June 2, 2003

NEW YORK -- The nation's unemployment rate has edged up to 6 percent, but frustrated jobseekers -- shoulder to shoulder with so many others who have recently lost work -- are convinced the number is missing something.

They're right, experts say.

The unemployment figure, based on the government's monthly survey of 55,000 households, only counts those people who have made an effort to look for a job in the last four weeks.

It does not count the substantial number of Americans who have gone back to school because they can't find a job, or those who have taken a part-time job for much less pay. It does not include people who, unable to find work, have set themselves up in their own businesses, many as home-based consultants.

And it does not count people who have become so demoralized that they've just given up looking.

Narrow definition

If all those people were included, economists and the Labor Department's own figures say, the figure would be about 10 percent of the work force.

"Right now the unemployment rate isn't telling the full story," said Jared Bernstein, an economist with the Economic Policy Institute, a Washington, D.C.-based research group.

Economists don't dispute the way the government collects its data. They say the household survey is careful and accurate, but that it defines "unemployment" so narrowly it is easy to misinterpret.

For example, in April, the last month for which the government released data, 8.8 million people were counted as unemployed.

That figure did not include 4.8 million people who are working part-time but want a full-time job, up about 600,000 from the previous year.

In addition, the survey found another 1.4 million people who want to work, are available and have looked for a job during the past year. But because they haven't looked in the past four weeks, they also weren't counted as unemployed.

That group includes about 437,000 people deemed "discouraged" -- those who have given up looking. That figure is up from 320,000 a year ago.

According to the government's formula, if people lose a job and just give up looking, "then you just disappear altogether. You're not in the labor force anymore," said Sophia Koropeckyj, an economist with Economy.com, a research firm in West Chester, Pa.

The government does publish a broader alternative unemployment rate, albeit one that gets limited attention. In April, that figure, which is not seasonally adjusted, was 9.8 percent, down from a high of 11 percent in January.

That compares to a recent low of 6.3 percent in October of 2000, when the traditional unemployment rate stood at 3.9 percent.

Labor force growing

The growth in the population of those who are available to work but are not working or looking, reflects the current economy but also points to long-term trends, economists say.

Bernstein points out that, over the past decade, the nation's labor force has been swelling by about 1 percent a year. That growth has leveled off, a sign that more people are putting off entry into the job market -- perhaps by going back to school.

Meanwhile, throughout the past decade, there has been growth in the number of people, particularly younger men with few skills, who are not working or looking, said Kevin Murphy, an economist at the University of Chicago's Graduate School of Business. Many of them are winding up on disability rolls, he said.

So jobseekers are right to feel like they're not in this alone. There is one common misconception, however. Many of those out of work are convinced the jobless rate only counts those currently receiving unemployment benefits. That is not the case, experts say.

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