Reader Response: The Uncounted Unemployed

BY busadmin  July 5, 2009 at 9:14 PM EDT

Paul Solman: A provocative response, via the PBS Ombudsman, to Thursday’s story about undercounting unemployment. The emailer said it was okay if her name was posted. I assume that means it’s okay to post her email here and use it to elaborate. Never pass up an opportunity of more time to expand on a TV story.

Re: McLehrer NewsHour July 2, Paul Solman on the “REAL” unemployment numbers. Usually his parts are great, this was too much guesswork.

Count all the disabled, guess at how many are now too worn out to look for work, the part-timers who want fulltime, etc. Why not throw in all the stay-at-home Moms & teens who’d like to have some extra $?

Everyone would like more $, just look at the bank CEOs, etc. Be honest, if a guy is on disability, he can’t work & so can’t be counted as a potential worker just because he’d like (& needs) more $. This piece was really too much speculation, and not enough real journalism. Shame on Solman, get back to what you do best: explaining tough economic concepts so anyone can get them.

Let me begin by sharing another email, from one Richard Milewski, “the second Editor-in-Chief of InfoWorld, Chief Technology Officer of a 1990’s Silicon Valley start-up that hit the wall when the bubble burst, and someone who had (until last autumn) been making an OK living doing strategic consulting in the educational (K12) technology space.” He wrote:

“There is little or no coverage, and virtually no statistics that I can find, on what the current recession has done to independent contractors (workers whose earnings are reported on IRS form 1099 instead of form W2). I suspect that the recession has hit them far harder than even the members of the UAW (who at least have a fairly articulate spokesperson, and congress-people who care)….There was a one-line mention on MSNBC a week or 10 days ago that said they expect 1099 workers to be 40% of the post-recovery economy. I suspect that number is too high, but if it’s anywhere near correct it means that our current unemployment rate it closer to 15% or 20%, than to the roughly 10% ‘official’ number (I live in California).”

Okay, now it’s my turn. The official unemployment rate, seasonally adjusted, was just announced as 9.5 percent, a mere .1 percent higher than last month’s 9.4 percent. Yet to America’s 14.5 million officially unemployed, some 450,000 more people were added in June — again, seasonally adjusted. Both numbers are higher, unadjusted, but assuming the adjustment is accurate, that’s still a roughly 3 percent increase in total people. But 9.5 percent is only 1 percent more than 9.4 percent. You see the discrepancy? How can the number of unemployed go up THREE TIMES as much as the official rate? Or, as the Bureau of Labor Statistics put it: “Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5 percent.” Huh?

Actually, the answer seems to be mainly that 200,000 or so people who say they want a job moved from “unemployed” to “out of the workforce,” because they didn’t look for work in the past four weeks, or even the past year.

And that was in fact the main point of our story, Ms. Jensen: that the official unemployment number doesn’t count people who, in the past, WOULD HAVE BEEN counted as unemployed and arguably should be; that the broader government numbers, U-4, U-5 and U-6 (which last number includes contract workers like your fellow emailer Richard Milewski) may be more indicative of just how bad the situation really is: 16.5 percent for June, going by U-6. At the very least, people ought to know what those numbers are.

As to those on disability, it certainly seems that, since applications vary directly with unemployment, there are many who, like Bob Zawacki in our story, would be officially unemployed were it not for Social Security. How many? That’s open to debate. But it’s hard to believe the official numbers wouldn’t be higher if not for disability, which didn’t even exist before the 1950s and didn’t become widely used until the ’80s.

As for prisoners, we may soon see their effect on the official data, as there’s a real possibility state budget crunches will force the release of many.

For the government’s definition of the various unemployment categories, simply go here.

For a look at how unemployment in the Great Recession compares to the Great Depression, you might want to check out Time Magazine’s Justin Fox, who has posted an interesting chart.

I appreciate the chance to go on at greater length about this issue, so thanks for the email. I stand behind the story — and its importance — fiercely.