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What Does the Solman Scale Say about Unemployment?

An applicant speaks with a prospective employer at a New York job fair. Photo by Getty Images/John Moore.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Here is Tuesday’s query:

Name: Bill Hogan

Question: What are the current unemployment numbers according to the Solman Scale?

Making Sense

Paul Solman: Our U-7 measures both UN- and UNDERemployment. It stands at 16.96 percent as of Friday, Sept. 7.

Remember that our statistic, designed to be the most inclusive out there, probably errs in both directions. On the one hand, a lot of Americans are undoubtedly working, off the books, while claiming they want a job but haven’t found one. Indeed, a recent email to Making Sen$e asserted the following: “I have personally known several on Medicaid and disabled vets who didn’t report work for cash or barter so as to keep essential healthcare for themselves or for their children.” And how sure can we be that Americans who work part-time, but say they want a full-time job, would actually work full-time if given the chance?

AUG 2012 Solman Scale U7 Unemployment

On the other hand, there’s the “undercounting” argument of well-known economist Dean Baker, a featured figure in several of our stories over the years: Is Your Pension Safe? States Struggle With Pricey Challenges, Some Find Silver Lining in Dark Economic Cloud, and most audaciously, a premature housing bubble story in 2003. He’s also been a frequent studio guest on the NewsHour over the years.

Baker collaborated with economist John Schmitt for the Center for Economic and Policy Research back in 2006, arguing that several million people are not picked up in the CPS. This causes the employment rate to be overstated by 1.7 percent.

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

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