HOW I SEE IT: More than one way to view jobless stats

Ever since the Great Depression, it seems, people have lived in mortal fear of losing their jobs. Politicians have therefore come to evaluate every conceivable economic issue with regard to its effect on jobs, and unemployment statistics often dominate press coverage of the economy.

Unfortunately, those statistics are easily manipulated to support partisan agendas. The press and politicians alike too often succumb to perverse incentives to play upon public fears by manipulating statistics to portray the situation in its darkest hues.

Without doubt, many Americans have lost their jobs as labor-market conditions have deteriorated during the current recession. The most recent report from the Bureau of Labor Statistics puts the unemployment rate for May 2009 at 9.4 percent, greater than any reported rate since the recession of the early 1980s.

Before the current recession, the unemployment rate had fallen to a cyclical low of 4.4 percent. Since it last touched that low point, in March 2007, it has increased by 114 percent.
Describing the situation in this way makes the economic bust appear to be very bad.

Some observers have also called attention to a broader concept of “unemployment,” produced by adding part-time workers who say they would prefer to work full-time and “discouraged workers,” who are no longer looking for a job because they believe they can’t find one. By my calculation, this bulked-up, unofficial measure of unemployment stood at 15.6 percent of the civilian labor force in May 2009.

It is tempting to think of employment and unemployment as mirror images of the same phenomenon, but that idea is misleading. The official unemployment rate, by definition, measures the number of civilians without jobs and actively seeking employment as a percentage of the number of civilians who are either currently employed or actively seeking employment (that is, all those “in the civilian labor force”).

When people leave employment, they may either become officially unemployed (if they continue to seek employment actively) or not (if they leave the labor force by not looking for a job). Similarly, when people enter the civilian labor force, they may do so by becoming employed or by becoming officially unemployed.

Therefore, the ebb and flow of the labor force acts as a sort of buffer between official employment and official unemployment. Careful labor economists routinely monitor all of these variables, including the number of involuntarily part-time workers and the number of discouraged workers.

To some extent, these complications can be circumvented by paying attention not to unemployment rates, but to employment numbers during the ups and downs of the economy’s aggregate fluctuations.