As U.S. jobs disappear at a rapid clip, the official unemployment
figure seems understated. While November's 6.7% rate is a full 2%
higher than the same time last year, the rate remains well below the
10.8% postwar peak, reached in November 1982. One issue is that the
official unemployment number captures only a slice of the total
joblessness in the U.S. To be counted as unemployed in this statistic,
a worker must not have a job, be currently available for work, and have
actively sought employment within the last four weeks. In other words,
a lot of the jobless are left out of the government's tally.
Rajeev Dhawan, director of Georgia State University's Robinson
College of Business, says the official unemployment rate is "not a good
measure of what is happening in the economy. It's drawn from a sample
too small and filled with too many assumptions. Absolute job losses and
retail sales give a better idea of what's really happening in the
economy."
Fortunately, digging deeper into the labyrinth of the U.S. Bureau of
Labor Statistics' (BLS) Web site can offer a more complete, if
imperfect, picture of joblessness. Since 1993, the BLS has tracked a
category of unemployed called U-6, which captures the total unemployed,
plus what the agency calls "marginally attached" workers and those
employed part-time "for economic reasons." For November 2008, that rate
was 12.5%, nearly double the official unemployment rate and the highest
since the government started tracking this category.
Outside Looking In
Marginally attached workers are those with no job and who aren't
hunting for one but who are interested in working—people who have left
the workforce because the employment situation seems so bleak that
they've stopped trying. This measure covers anyone who has looked for
work in the past 12 months, not just the past four weeks. In November,
1.9 million workers were marginally attached, up 637,000 from a month
prior. This category includes long-term unemployed, such as factory
workers who can't find a job paying close to what they'd been earning
before. Unemployment rates in construction and extraction jobs such as
mining hit 12.1% in November, followed by 9.4% in production jobs. That
means the ranks of the marginally attached will increase.
Those employed part-time for economic reasons, who are counted as
employed in the official statistic, want and are available for
full-time work but have had to settle for a part-time schedule. As of
November, the number of workers in this category rose by 621,000. There
are now 7.3 million involuntary part-time workers, up 2.8 million over
the past 12 months.
Contract workers, sometimes known as freelancers or independent
contractors, face a special set of problems when it comes to being
counted by the government. First, employers aren't required to report
layoffs of contract workers to the government, so when companies say
they're cutting their contractor workforce—as Google (GOOG)
did in October—no one knows by how much. These job cuts are also not
recorded in the official job-cut statistics tracked by the government.
In other words, the 533,000 jobs lost in the November count don't
include any of the tens of thousands of contract workers being slashed
from company payrolls as the recession deepens.
Falling Between the Cracks
Some self-employed workers are incorporated into other BLS
statistics, but not all of them are counted. Those traditionally
considered self-employed, such as independent real estate agents or
accountants, are included in the government's household survey of the
unemployed. But those working as long-term freelancers for one
particular company without the benefits of being staff members—often
dubbed "permalancers"—are not. That means a good portion of this group,
which the Government Accountability Office says makes up 10% of the
workforce, isn't properly tracked. "We really don't know what is
happening with the [contractor employment] numbers," says Sara
Horowitz, founder of the Freelancers Union, a 93,000-member
organization of contract workers. Horowitz says the government should
develop better measures of contract workers, perhaps by identifying the
number of contractor tax filings with the IRS each year. "An increasing
part of the economy is driven by this new workforce, but government
agencies haven't updated their methods for counting them," she says.
The BLS does capture other pieces of the unemployment puzzle. It
breaks out such demographic categories as education levels. As of
November the unemployment rate for college graduates increased less
than a percentage point, to 3.1%, while the unemployment rate for high
school dropouts rose from 7.6% to 10.5%. The BLS also tracks such
categories as age and ethnicity; the unemployment rate in November was
32% for black teenagers, for example. Other data offer state-by-state
comparisons of unemployment rates. In the most recent data, which cover
the first 10 months of 2008, Rhode Island and Michigan were tied with
the highest unemployment rate, at 9.3%, with California next at 8.2%.
Though not officially a state, Puerto Rico's rate stands at 12%.
Still, calls for improving the BLS metrics continue. While Horowitz
presses for better accounting of contract workers, Georgia State's
Dhawan says the surveys need to account for population growth. "Fifty
years ago, the [official unemployment] number had some validity," he
says. "Now I have little faith in it."