Transcripts

"Reviving the Economy: Jobs"-What's In A Number?

SUSIE GHARIB: Almost all the nation's major cities lost jobs last year. The Labor Department said today jobless rates climbed in 98 percent of the largest metropolitan areas in 2008. Hardest hit, Indiana's Elkhart-Goshen region, where the unemployment rate now stands at 15 percent. Hundreds of workers there have lost jobs at RV makers Monaco Coach, Keystone RV and Pilgrim International. Meanwhile in Dalton, Georgia, the jobless rate is 11 percent as floor-covering firms have laid off workers because of the downturn in housing. Meanwhile the employment situation nationwide isn't much better. A new report by ADP Employer Services shows that American businesses cut more than half a million jobs last month. The only good news, that was less than the 659,000 jobs lost in December. Those private figures are a prelude to the government's employment report that comes out on Friday. As we continue our series, "Reviving the Economy: Jobs," Suzanne Pratt looks behind the numbers, explaining why they don't tell the whole story about the state of the job market.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: The nation's unemployment rate is expected to rise to 7.5 percent when the government releases its monthly report on Friday. But, what if I told you there's another picture of the labor market that shows the situation is actually far more dismal, with the jobless rate really closer to 14 percent. Before you freak out, please understand the Labor Department isn't scamming us. It's just that the official unemployment figure, known as U-3, does not include people who are so discouraged they've stopped looking for a job. It also does not include those who could only find part-time work. The government tracks those people on a monthly basis. And it puts them into a more comprehensive but less talked about unemployment rate known as U-6. Economist Laksman Achuthan says the headline number could be considered misleading.

LAKSHMAN ACHUTHAN, MANAGING DIR., ECONOMIC CYCLE RESEARCH INSTITUTE: Some people will say, whoa, you're totally sugar coating it. It's much worse than that if you include people who are working less than they want to work or if you include people who have given up looking for work.

PRATT: In the last decade, the total all inclusive number of unemployed Americans, including discouraged workers and underemployed, has gone from 8 percent to nearly 14 percent. That's the highest since the government began tracking U-6 in the 1990s. The surge in U-6 may also explain why the U.S. job market currently feels much worse than an unemployment rate of 7 percent might suggest. But economist David Resler says the widely watched unemployment rate isn't flawed. It just isn't the whole story.

DAVID RESLER, CHIEF U.S. ECONOMIST, NOMURA SECURITIES: The unemployment rate doesn't tell you everything you need to know about the labor market. There are other measures of unemployment and under employment that do tell you a lot more and perhaps we should look at those and pay more attention to them.

PRATT: NYU economics Professor Larry White says the widely watched jobless rate is the best measure of what's happening in the economy, if one needs historical context.

LAWRENCE WHITE, ECONOMICS PROFESSOR, NYU STERN SCHOOL OF BUSINESS: It's a good, reasonable benchmark especially when you use it as compared with other similarly reported data from a few months ago, a few years ago, even a few decades ago.

PRATT: U-3 or U-6 it really doesn't matter. Most economists agree it's not the unemployment rate that's critical when evaluating the labor market. It's the direction the rate is moving in. And without a doubt, the jobless rate is moving higher at disturbing pace. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.

GHARIB: Tomorrow, hundreds of thousands of part time workers aren't covered by unemployment insurance but some say they should be. That as we continue our series, "Reviving the Economy: Jobs."