Unemployment Figures: Worse Than They Appear

BY Paul Solman  December 3, 2010 at 12:05 PM EDT

The verdict on today’s unemployment numbers is unequivocal. Making Sense Conservative economist Peter Morici writes: “Terrible! Only 39,000 new jobs created is awful.

After we back out health care and social services, which are largely government funded, the private sector is not creating permanent jobs — none, zero, nada. After health care, social services and temp services are backed out, the private sector lost 24,000 jobs. Ugh!”

The liberal Economic Policy Institute writes:

The surprisingly bleak report also hits another grim benchmark – at 19 months, this downturn now matches the longest stretch since WWII with an unemployment rate of 9.0% or over. In the recession that began in 1981, the unemployment rate was at 9.0% or over for exactly 19 months. At the tail end of those 19 months, however, the unemployment rate was already falling fast. Today’s situation stands in stark contrast, with the unemployment rate expected to remain at over 9% through at least 2011.

Moreover, as we’ve been pointing out since the last “jobless recovery”, today’s jobless rate, taking into account various changes since 1981, would be much higher than reported.

Given that month-to-month numbers may reflect sampling error, the most disturbing trend in today’s numbers may be the “employment/population ratio”; that is, what percentage of all Americans 16 and older not in “institutions” (prisons, hospitals, the military) are actually working at all. That number is now down to 58.2 percent and has been declining slowly but surely, pretty much month to month. Maybe they’re flocking to college and grad school. Maybe they’re retiring early.

Or maybe they’re just unemployed.

That wouldn’t be surprising, since nearly 200,000 more Americans reported themselves as “unemployed” in November, meaning they’d didn’t work a jot in the week prior to being interviewed and looked for work in that week.

As to the most inclusive official number, which the government labels “U-6,” it’s hovering near 30 million Americans.

And as we’ve long noted, even that total doesn’t include anyone who reported not looking for work in the past 12 months. The government’s statistical presumption is that these folks have quit the workforce entirely. As a result, they’re not counted at all.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._