Every story about the unemployment rate brings cries of
”
What about?
”
from the public. What about all the discouraged workers? What
about part-timers or people whose unemployment insurance has run
out?
Every story about the unemployment rate brings cries of “What about?” from the public. What about all the discouraged workers? What about part-timers or people whose unemployment insurance has run out?
My goal is to explain some the details behind the official numbers in condensed form. The majority of this information comes directly from the Bureau of Labor Statistics, but the conclusions are mine.
The federal government does many kinds of surveys, but only one officially establishes the unemployment rate – it’s called the Current Population Survey. It’s commonly known as the “household survey” because that’s how it’s conducted, by surveying households, not by checking records. When you see an unemployment rate, it is almost always referring to the CPS.
Rates are published as seasonally adjusted or unadjusted. A seasonal adjustment is used to remove the seasonal variations in the data. This allows accurate, relative comparisons from month to month all year. The key is always to compare apples to apples across months or even years.
There is also what the government calls “alternative measures of labor underutilization.” I’ll cover those later, but in simple terms, the CPS is the headline unemployment rate you always see. Is the CPS accurate? Well, it measures accurately, but that does not mean what it measures tells the whole story?
How is the CPS performed?
Using a rotating sample, government employees interview the members of 60,000 households, about 110,000 individuals, each month to complete the CPS. The statistical sample is designed to represent the population. There can always be sampling errors, but these are usually very small. Trained specialists conduct the interviews. They focus on the labor force activities (jobholding and jobseeking) or non-labor force status of the members of these households who are 16 years and over.
Subjects are not asked specifically if they are unemployed, nor are they given an opportunity to decide their own labor force status; the interviewers do not decide the subjects’ labor force classification either. They simply ask the questions and record the answers. The information collected is programmed into a computer and individuals are then classified as employed, unemployed, or not in the labor force.
Interviewers are given intensive training and their work is checked randomly. In addition, at least once a year, a supervisor accompanies them to determine how well they carry out their assignments.
The basic concepts involved in identifying the employed and unemployed are simple: people with jobs are employed; people who are jobless and looking for jobs and available for work are unemployed; people who are neither employed nor unemployed are not in the labor force.
The survey is designed so that each person in the sample who is neither in an institution nor on active duty in the Armed Forces is counted and classified in only one group; employed, unemployed or not in the labor force.
Not all of the job situations in the economy fit neatly into a given category. For example, people are considered employed if they did any work at all for pay or profit during the survey week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Persons also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid, for various reasons. This includes because they were on vacation, ill, had child-care problems, taking care of some family or personal obligation, on maternity or paternity leave, involved in an industrial dispute or prevented from working by bad weather. These persons are counted as employed and tabulated separately as “with a job but not at work,” because they have a specific job to which they will return.
Unpaid family workers comprise a relatively small proportion of total employment. Most of the employed are either wage and salary workers or self-employed. Other information regarding employment is also is collected.
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior four weeks, and are currently available for work. Actively looking for work may consist of many activities. These might include contacting an employer or public or private employment agency, sending out resumes or filling out applications, and placing or answering advertisements.
Passive methods of job searching do not have the potential to result in a job offer and, therefore, do not qualify as active job search methods. Examples of passive methods include attending a job-training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.
Workers expecting to be recalled from temporary layoffs are counted as unemployed, whether they have engaged in a specific jobseeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the four weeks preceding the interview and be available for work except for temporary illness.
Based on the above, the survey counts those in the sample actively looking for work; however, those not actively looking for work would not be counted in the labor force and, therefore, they are not considered unemployed.
Alternative measures of labor underutilization
Some have argued that this measure is too restricted, and that it does not adequately capture the breadth of labor market problems. For this reason, economists developed a set of alternative measures of labor underutilization. They range from a very limited measure that includes only those who have been unemployed for 15 weeks or more to a very broad one that includes total unemployed, all persons marginally attached to the labor force, and all individuals employed part time for economic reasons.
The alternate measures of labor underutilization has six state measures. They are numbered U-1 through U-6. The number is always a percentage of the civilian labor force. The following are the definitions of the alternate measures of labor underutilization averages for the last three months of 2009 through the first three months 2010 for California.
Measures of Labor Underutilization Percent
– Persons unemployed 15 weeks or longer: 7.3%
– Job losers, completed temporary jobs: 7.8%
– Total unemployed (official unemployment rate): 12.0%
– Total unemployed plus discouraged workers: 12.7%
– Total unemployed, discouraged, other marginals: 13.8%
– Total unemployed, marginals, part time for economic reasons: 21.9%
Obviously, there are some big issues with the CPS unemployment rate. The biggest at this time are employees doing temporary or part-time work who are seeking permanent or full-time work. They are classified as employed. It would probably be more accurate to say that they are partially employed, but the survey does not operate that way.
Marty Richman is a Hollister resident.
