Saturday, December 3, 2011

Lies, damned lies, and statistics

Question: What is the actual unemployment rate in the United States these days?

Answer: No one knows.

I haven't been paying much attention to the news lately, but one item that has gotten repeated a lot (even on the local classic rock station) is that the latest official national unemployment rate has dipped below 9%. This is viewed as good news, and maybe it is. Then again, maybe it isn't. Have the numbers gone down because fewer people are losing their jobs? More people are returning to work? More people have had their unemployment benefits run out and so are no longer counted as among the unemployed? How about the jobless who never qualified for unemployment compensation to begin with? Did they count when they first lost their jobs, and do they count now? Does anyone know?

This is a question I've thought about for years. At one time the official unemployment rate was determined by doing a phone survey of a random sample of the population: x-number of households would be called and people asked if they were working or looking for work (and, from what I could determine from looking at the Labor Department web site, that's still the methodology used). Didn't matter if you were working less than full-time or if you were working for less money than you wanted or needed, if you collected wages for at least one hour of work per week, you were employed. If you had been unable to find work for so long you'd given up, you were no longer statistically unemployed. You might not have a job, you might wish you had a job, but if you weren't out there pounding the pavement or sending out resumes, you were not unemployed for statistical purposes.

Phone surveys have some obvious flaws. Even back before the proliferation of cell phones, there were always people who did not have a telephone. Any active job seekers who didn't have phones were automatically excluded from the survey data. Given that people without jobs are probably more likely than people with jobs to not have a telephone, how skewed did that make the data? Who knows? And did anyone care?

Another way of talking about unemployment rates is to look at how many people are drawing unemployment compensation at any point in time. If you're unemployed, you're on unemployment, right? Wrong. Depending on the state, as few as 30% of people who lose their jobs actually qualify for unemployment benefits. If your job is seasonal, you might be screwed: back during the Engler administration, the state of Michigan changed its rules to prevent seasonal workers from collecting anything. To draw any benefits in Michigan, you have to have wages earned in more than one quarter of a year during the past 5 quarters and you have to have earned  a certain minimum amount in each of those quarters. If you're a minimum wage worker depending on seasonal work (e.g., motel maid in a summer resort town), you may never earn enough money to qualify for unemployment when the inevitable furloughs happen. I had the disconcerting experience once of having worked full-time for almost a full year and then when the job ended in mid-June being told I didn't qualify for unemployment insurance because I had not been working in June the year before. It was bizarre: ten months of full-time employment at a decent wage, and still not eligible for unemployment compensation.

The other way (and probably the most common way) the unemployed find themselves disqualified for unemployment compensation is when their former employer makes a false claim that the employee was fired for cause rather than being furloughed due to lack of work. One of the great myths circulating among the credulous is that if you get fired, you can go on unemployment. Not true. Being terminated for cause (and cause can be very loosely defined) is an automatic disqualification. So is voluntary termination without cause -- i.e., if you quit a job because you don't like it, you can't draw unemployment; if you quit a job for a good reason (your paycheck bounced, for example, or working conditions are unsafe and you can prove it), you might qualify for jobless benefits. I once worked as a power sewing machine operator for a company where the paychecks bounced; several of us quit, we filed for unemployment, the owner* tried to deny the claim, and the unemployment referee ruled that it is a fundamental right of employees to get paid for their work. Of course, that was back in the halcyon days of the Carter administration; I fear the ruling would be different today.

So if the Labor Department's numbers are skewed because of a dubious methodology and the numbers for people drawing unemployment compensation only catch a minority of the actual unemployed, just what is the unemployment rate in the United States? Or, to put it another way, just how much worse is the truth than the sugar-coated information the politicians are giving us? Is there any way to know?

[*To this day, I'm amazed he was able to put down the coke spoon long enough to pay attention to the business for more than a nanosecond. Paychecks bounced because most assets were going up his nose.]


  1. The most accurate accounting is usually the Census Bureau's household survey. These are forms sent to a random selection of households, with followup by Census workers for those forms not returned. I got one of these a few months back and put down I was the only person in the household and was gainfully employed, there was room for like a dozen people on the form.

    The problem with the household survey is that it's a snapshot as of a specific point in time that's a couple of months back, since that's how long it takes to get replies back on the forms. The BLS survey is less rigorous but that's the number that gets reported. Furthermore, the household survey doesn't account for the homeless, though the Census Bureau *does* try to sample the homeless via hitting a random selection of homeless shelters and trying to estimate how many of those people actually have jobs, but the problem is getting an answer from the homeless, which can be difficult since many of them have, erm, authority problems. Still, I'd take the Household Survey data over the BLS data as the closest thing to "definitive", and in case you're wondering, the BLS feels the same way -- thus why their data gets "adjusted" once the Census data is available to them.

    - Badtux the Statistical Penguin
    (And former Census worker back during my teaching days).

  2. The government will always lie about the numbers when they are trying to keep everyone's hopes up.

    And as long as the capitalists can still rake in money I don't think they give a shit what the numbers are.

    So shop until you drop.

  3. It is obvious that temporaty holiday employment has dropped the numbers. By February they will rise again unless, as you said, the temp workes can't get benefits and then they will just disappear from the statistics. If someone did a real polling of the unemployed and the underemployed it would likely be horrifying.

  4. Susan, there is a seasonal adjustment that's supposed to factor out the seasonal workers. That said, for the past four years that seasonal adjustment hasn't been accurate -- once the Census numbers came in several months later, the BLS had to go back and adjust their adjusted numbers. Something's gone wrong with the seasonal adjustment, and that something probably has something to do with us being in the Great Recession rather than in normal times...

    - Badtux the Statistical Penguin

  5. There are basically 6 indices of unemployment for the US economy (u-1 through u-6); all have different applications but none are reliable counts of people with inadequate jobs (relative to skills, willingness to work, etc). All measures move in formation (U-1 is always lowest, U-6 is always highest).

    I would say that you might want to think over what "unemployment" means to you. Is the issue that it's higher now, or is it that you're becoming aware that it's always been much too high?

    One final thought: you're on the right track, wondering how people survive.


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