What Percent of the Country is Unemployed? And Why Is This So Complicated?

 

This chart from the Bureau of Labor Statistics (poorly hacked to fit, here’s the original) shows the job numbers released on Friday and what they mean (well, kind of—those definitions aren’t exactly illuminating). The U-3 number—the “official employment rate”—is the number that gets all the attention, but I’ve always wondered about the U-6 number—that bigger, scarier number. Why it doesn’t make headlines? Why, when the jobs numbers were released on Friday, was 8.1 the percentage that was plastered all over the place, and not 14.7? And most importantly: Which number tells you how many people do not have jobs?!

NYT public editor Margaret Sullivan’s Friday column explains it a bit, and I talked to Heidi N. Moore and another financial journalist to get the fuller story. IS A CONSPIRACY AFOOT?! (No.)

Sullivan’s column on the U-6 number was spurred in part by this passage, part of a letter printed by reader Alex Dering:

“Although Mr. Schwartz’s article makes very clear that the drop in unemployment is simply a mathematical sleight-of-hand as more people simply cross into the gray zone of no longer counting as a statistic, The New York Times still resists even a hint of a whisper of a murmur of the U-6 statistic, which puts the number of people who are not employed or who are underemployed — underemployed is a technical term meaning “starving to death more slowly than the unemployed” — at 14.6%: One in seven.”

A compelling point! So what gives? Sullivan asked NYT business editor Winnie O’Kelley to explain:

“Ms. O’Kelley responded that she and her staff were well aware of the U-6 number, and that ‘we do look at it,’ whenever The Times is reporting on unemployment. However, ‘continuity over time is important. We use the official number of unemployed as the benchmark.’ It’s a number people understand as a basis for comparison, she said. ‘Generally speaking, the trends are similar.’”

I asked Heidi N. Moore, the NY bureau chief for Marketplace and also the KNOWER OF ALL THINGS,to elaborate.

“The basic reason financial journalists depend on the headline employment number is that the trends are the same in the headline number and the U-6. That’s true. The actual real U-6 number is so enormous that it’s worth noting essentially every time. Almost every publication reports it that way. I think the basic idea is that we write about the headline number and then we KEEP writing about the headline number, so it keeps stories consistent over time.”

So that makes sense. That makes total sense. Consistency is important for monitoring trends. BUT, given that the the U-6 number is a better indicator of The Actual Percentage of Actual People Who Are In America And Want to Have Jobs But Do Not Have Jobs or Do Not Have Enough Jobs, it seems to me that it’s the number that should be making headlines. The U-3 number is essentially meaningless without the context of whether it’s gone up or down. Eight percent of the country is not unemployed. That is false. FIFTEEN percent of the country is unemployed. It sounds worse because it is worse.

Another journalist I talked to said, “From a media perspective, it’s probably a question of consistency/inertia. ‘Why are we doing this different now?’ That’s a very hard bar to clear at big, mainstream media orgs. It’s also true, to a degree (if we’re doing media criticism), that those numbers are a very loose barometer of how we’re doing. But if you actually want to know ‘how many people in the US do not have jobs but wish that they did’ the U-6 number is probably the right one. It includes people who have dropped out because they stopped looking, and/or are working part-time but wish they were working full-time. But to be fair you have to go back and look at what it was historically and whether it’s come down.”

In August 2002, the U-6 was 9.6% (the U-3 was 5.7%)
In August 2003, the U-6 was 10.1% (the U-3 was 6.1%)
In August 2004, the U-6 was 9.4% (the U-3 was 5.4%)
In August 2005, the U-6 was 8.9% (the U-3 was 4.9%)
In August 2006, the U-6 was 8.4% (the U-3 was 4.7%)
In August 2007, the U-6 was 8.4% (the U-3 was 4.6%)
In August 2008, the U-6 was 10.8% (the U-3 was 6.1%)
In August 2009, the U-6 was 16.7% (the U-3 was 9.6%)
In August 2010, the U-6 was 16.6% (the U-3 was 9.6%)
In August 2011, the U-6 was 16.2% (the U-3 was 9.1%)
In August 2012, the U-6 is 14.7% (the U-3 is 8.1%).

 

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4 Comments / Post A Comment

Morbo (#1,236)

The two that really matter are the ones that are least able to be manipulated:

-The employment-to-population ratio. The statistical ratio that measures the proportion of the country’s working-age population (ages 15 to 64) that is employed. This is at 58.3%

http://research.stlouisfed.org/fred2/series/EMRATIO

The labor force participation rate – The percentage of working-age persons in an economy who ere employed , or are unemployed but looking for a job. This is at 63.5%, a thirty year low, and damn scary, as it keeps dropping.

http://research.stlouisfed.org/fred2/series/CIVPART

TARDIStime (#1,633)

@Morbo
Good point – I never thought about the fact that some of these figures might have included retired people/small children, who don’t really count if they’re able to live comfortably without working/are not old enough to work yet.
Though I think “retired” will become a little more elastic with the Baby Boomer generation due to 2008 stealing lots of retirement savings (aka “superannuation” here in aus – it’s money everyone has saved specifically for retirement and is invested in shares. My partner’s dad lost 1/3 of his retirement savings in 2008 when the stock market crashed and he’s only 10 years away from retiring :-S).

Matt Yglesias has a good post on this. Basically U-3 tries to measure the thing that is “people who want jobs but don’t have them.” Everything else doesn’t try to measure that. Maybe those things actually measure it better than U-3 but, since they don’t try to, that would be pretty coincidental and hard to extrapolate trends from.

OK I realize this is a couple days old, but good post!

I think what financial journalists are not getting, and where the story actually lies, is the ratio between U-3 and U-6. Are there more people who are discouraged/marginally attached, and if so, why? To their credit, journalists have talked about this during the current jobs report (basically noting that the change was people dropping off the “looking for work” roles).

Another interesting factor is that because of the requirements to be looking for work to receive unemployment insurance, extending UI benefits can keep the U-3 unemployment rate higher than it would otherwise be (because a lot of people are “looking for work” even though they’re really discouraged and have little hope of finding any).

As Morbo says above, the labor force participation rate may be the more neglected stat at least among mainstream journalists. I suspect that a large proportion of this drop is dual-income households turning into single-income households, which is not as scary or bad as households with no breadwinner whatsoever, but still Not Good.

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