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Last updateTue, 04 Nov 2014 9pm

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Unemployment: It’s probably worse than you think

There are a lot of indicators used to assess the health of the nation’s economy. There is the Gross Domestic Product (GDP), which is the sum of all we buy, sell, and produce. There is also industrial output, orders for durable goods, various leading economic indicators, and surveys of consumer sentiment. However, for most people, the ultimate measure of economic distress or well being is unemployment. While the other economic statistics are just that, statistics, unemployment is personal.

As Harry Truman said, “a recession is when your neighbor loses his job and a depression is

when you lose your job.” According to the most recent unemployment data released by the federal government, the percentage of Americans without a job and looking for work is 9.1 percent. That’s bad enough, but it doesn’t begin to tell the whole story.

The percentage of the workforce that’s unemployed is calculated using data collected by the US Census Bureau — and you thought they just ran the Census every 10 years. Each month they survey up to 60,000 households concerning their employment status. They also gather payroll information from as many as 100,000 employers. This data then goes to the Labor Department’s Bureau of Labor Statistics for analysis. It’s a big sample and U.S. unemployment statistics are considered some of the most reliable in the world. However, what’s often released to the public and what we see quoted in the media reflects only a part of the data that’s collected.

The percentage commonly quoted in the news is referred to by the Bureau of Labor Statistics in their coding system as U1 and represents the number of persons unemployed and actively looking for work as a percentage of the total civilian workforce. However, many economists have their doubts that this number accurately reflects the nation’s unemployment picture.

What the number doesn’t include are those Americans who have given up looking for work altogether or who have become what the government calls “only marginally attached to the workforce” and are engaging in occasional employment when they’re able to find it. It also doesn’t capture the number of Americans who are working part time jobs, but would rather be working full time. The BLS does calculate this data, they even have a code for it, U6, but it’s almost never quoted. However, it should be.

Last month’s U6 unemployment figure — part timers who don’t want to be, marginally attached workers, and those who have simply given up looking for work — was 16.5 percent. That’s a staggering number and what it implies is that there is a far larger number of Americans who are unemployed, as well as a group that’s also never mentioned, those who are underemployed.

If you’ve ever looked at the officially reported state-by-state unemployment data, the difference between the standard unemployment report and the broader definition under U6 is staggering. But it’s also more believable. Using the conventional definition of unemployment, Michigan, a state whose principal industry all but collapsed two years ago, has a jobless rate of 10.5 percent. However, if the broader number is used, the U6 data, the percentage rises to 22 percent. While that sounds like a large number, and it is, to anyone who realizes just how many people have lost their jobs in Michigan it seems like a much more reasonable assessment of the situation.

The same is true for Nevada. It has a conventional unemployment rate of 12.5 percent. That’s bad enough. However, given the state’s near economic basket case status, with the second highest foreclosure rate in the nation, and not too far behind in bankruptcies, as bad as the monthly unemployment report sounds, like Michigan, it seems a little low. With the broader definition it rises to more than 20 percent. The same kind of difference between the reported rate and the expanded definition of unemployment, is also evident, though not quite as bad, in California, Pennsylvania and West Virginia.

U6 unemployment hasn’t always been so large. In 2001 it was 7.5 percent. However, with the start of the recession it’s been steadily increasing. One of the reasons is that manufacturing employment, the source of jobs for entire regions of the country, has declined sharply since 2007. The idling of the construction industry has had a similar effect. Workers, even those who are considered skilled or semi-skilled, can’t find jobs and the result has been the kind of long-term unemployment characterized by discouraged job seekers, part time employment, and workers considered only occasionally attached to the workforce.

The broader unemployment rate, while rarely quoted (and I can understand why), probably does a better job of reflecting what’s really going on in the economy than does the conventional number. It’s also an indicator of the depth of this recession. And sadly, while that official number might, hopefully start to decline, the people who are in that chronically unemployment or underemployed status are going to take a lot longer to find their way back into the workforce.

You may reach David Kerr at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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