On August 5th the U.S. Bureau of Labor Statistics (BLS) via the Department of Labor announced that there wasn’t much movement in the unemployment rate (from 9.2% to 9.1%) and in the number of unemployed persons (13.9 million) since April. However,  117,000 new jobs have been created since June with most of the job gains in health care, retail trade, manufacturing and mining. Not such great news.

Whenever the U.S. Department of Labor announces the nation’s quarterly unemployment rate I always double it. I believe my mathematical adjustment better reflects the country’s true unemployment status of its citizens.

The gathering of unemployment data has been incomplete and under-reported. In other words, the unemployment numbers are utter bullshit.

Who are they counting?

Every day I hear and read about people who have been unemployed for years; living on their savings to get by. I see obviously unemployed 20somethings roaming the malls or riding the metro. I’ve been in DC libraries in the afternoon where I see people between the ages of 30-60 using the library computers or personal laptops looking and applying for jobs. I talk to people who have family members who were laid-off from their $70K+ jobs who are now working part-time for $8/hour at some retail store. I know people who have been underemployed for almost four years and have been looking for full-time work for just as long. We see some of these people every day. Does the BLS see these people?!

If the BLS numbers were a true reflection of the nation’s jobless rate–which is probably closer to my suggested 19.2% instead of 9.1%– Americans would be stunned. They would also be very scared if  they came across this tidbit on  the BLS website which states that “UI information cannot be used as a source for complete information on the number of unemployed.”

The UI (unemployment insurance) is the number of people who apply for and receive unemployment benefits. The reason why this data isn’t a complete source because it doesn’t calculate a) unemployed people delaying to apply for unemployment benefits; b) those who are underemployed and 3) those who have exceeded their unemployment benefits and have given up looking for work. Most importantly, this data, unlike the unemployment rate isn’t collected monthly; normally it’s done quarterly or biannually.

Yet the the BLS numbers are used as the source for unemployment data; constantly reported as gospel. How can BLS data be reported as factual when its own website implies that some of its data is incomplete?

History of Unemployment Data

The BLS has been reporting the nation’s unemployment numbers for over 70 years since 1933 during the President Franklin Roosevelt’s Administration. These numbers are what keep the nation going. Financial decisions ranging from corporate investments to whether to buy a new home are sometimes determined by the reported unemployment rate.

The unemployment numbers are based on the Current Population Survey (CPS) a monthly survey conducted by the U.S. government that calculates the rate of unemployment in the United States. The survey does not interview every American which would be unwieldy, but a sample of the population. That sample amounts to 110,000 individuals (60,000 households) at least 15 years of age that are surveyed per month. The samples are grouped geographically so as to represent each state and the District of Columbia.

CPS is the largest survey conducted and claims that its numbers are right “90 out of 100 times” meaning that there count is probably off by “290,000 people.”

All these caveats and qualifications to their data, yet their unemployment numbers are still repeatedly cited as an economic bellwether.

It’s not only their data which is  a tad suspect, but how it defines employment and unemployment is also food for thought.

Employed vs. Unemployed

According to the BLS website “People with jobs are employed. People who are jobless, looking for jobs, and available for work are unemployed. People who are neither employed nor unemployed are not in the labor force.”

Sounds simple enough, but labor statistics are not that clear-cut, though BLS’s data seems to suggest that it is.

BLS attempts to do its best to provide factual and erroneous-free data stating that its interviewers “do not decide the respondents’ labor force classification.” The BLS sites states that interviewers (U.S. Census workers) are instructed to “simply ask the questions in the prescribed way and record the answers.” Then “based on information collected in the survey and definitions programmed into the computer, individuals are then classified as employed, unemployed, or not in the labor force.”

Let’s take a look at those definitions which help decide the nation’s unemployment rate:

  • employed – The BLS numbers that contribute to the unemployment/employment rate doesn’t specify whether your employment is part-time or full-time. It doesn’t go into details about whether you’re job is a minimum wage job that you had to take because you were laid-off from your $60,000/year job. It doesn’t worry about the fact that your full-time job was switched to a part-time job with less money. It doesn’t account for the fact that your part-time hours were cut from 30 hours to 10 hours per week. As long as you are employed in some capacity, no matter how untenable or financially debilitating it is, the BLS considers you to be employed.
  • employed/length of employment – The BLS will also classify you as being employed if you’ve worked at least 5 weeks during their quarterly reporting periods. In other words, as long as someone works at least 20 weeks out of a 52-week period they’re considered gainfully employed. Some of these people may actually be underemployed, but not according to BLS.
  • unemployed – This number is based on those people who have filed and received unemployment benefits (UI). The emphasis should be on ‘filed’ because as far as BLS is concerned if you are unemployed and not receiving unemployment benefits then you’re not on their unemployment radar. Some of us know people who have been laid off from work whose unemployment benefits have run out and have been looking for employment for months, sometimes years. The BLS doesn’t have a classification for these individuals, but they are out there
  • not in the labor force – This antiquated description is for those who are 16+ who have never held a job or looked for a job. People who have not worked or no longer work due to a disability. One of BLS’ examples mentioned on their site is named ‘Linda Coleman’ who is a homemaker who is “occupied with her normal household chores” and has “neither held a job nor looked for a job.” According to the Business Insider, teen participation rate in the workforce has been on the decline since the 1950s. As of January 2011 teens represent only 3% of the workforce though there are 74 million teens in the U.S. Surely the unemployment rate would increase if it had to account for an influx of fresh on-the-job market teens looking for work.

The job status for many Americans is not as clear-cut as it used to be, yet BLS still gathers its data based on the definition of employment that was established during the era of the FDR presidency and the Great Depression.

Truth in Numbers

It is impossible to survey every person in the United States about their employment status, especially if you’re trying to report this data on a monthly basis.

However, there has to be a way for BLS to track those people who no longer receive unemployment benefits, to find out about their employment status post-benefits. We need to know if these individuals have found a full-time position with comparable salary and if they’re underemployed or unemployed. If they’re still unemployed are they looking for work or have they taken a temporary or permanent break from job hunting?

Back to the 9.1% unemployment rate. It does paints a semi-rosy picture, even though several job prognosticators and economists see it as an arbiter of even more bad news to come. The fear is that if the nation hits double digits then we will be in worse shape, than expected. The fact is many Americans are already there, some have been experiencing the worse for quite some time.

Sophia Koropeckyj, a labor economist at Moody’s Analytics a credit analysis and financial management firm said, “Clearly, the 9.1 percent does not at all reflect what is going on” about the unemployment rate.

You can’t get much clearer than that. Too bad BLS’ data can’t do the same.