Monday, February 9, 2015

Gallup: The Big Lie of 5.6% Unemployment

I have been surprised about the positive unemployment numbers coming out of Washington. The

official unemployment rate is now 5.6% and that is not too bad.  I, however, still see a lot of unemployed people. I have not seen that things are getting much better and I don't think most Americans feel things are getting much better. Still, I have tended to accept the official numbers.

I once worked for the Bureau of Labor statistics myself and developed trust in the work of the Department of Labor.  My view has been that professional statisticians do not manipulate numbers for political purposes.  When I worked for the BLS, I had a part-time job as a field rep gathering price information over time. This data, along with the data from lots of other people in other places doing the same thing, was used to compute the Consumer Price Index, which is often considered a measure of inflation. I read the information explaining the methodology of the development of the consumer price index, which at my pay grade I did not have to know but I found interesting. While many people would complain about rising prices, I was actually measuring prices and understood how the CPI was developed. I concluded the individuals complaining of rising prices were wrong and the BLS which produced the CPI was correct.

I have pretty much felt the same way about the measure of unemployment as I did the measure of the CPI. I have heard the conservative critics doubt the rosy unemployment numbers and I have not felt that a lot more people were working than before, and yet I tended to assume the unemployment numbers were correct. After seeing the lawlessness of the Obama administration however, and the way the IRS has been used to go after critics of the administration, I have become more suspicious of official information coming out of Washington. Skepticism has slipping into my acceptance of official statistics.

When ideological opponents of the Obama administration question the unemployment numbers, it is easy to dismiss them and conclude that are nit picking and cherry picking data to avoid giving the administration credit for an improving economy. This week, the renowned and trusted Gallup organization came out with a statement by Jim Clifton, chairman and CEO of Gallup, in which he says the unemployement numbers produced by the government are a "big lie."  The Gallup organization knows a thing or two about statistics.

Gallup's Clifton says, "The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading."

Below are excepts from the article:
If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you've stopped looking over the past four weeks -- the Department of Labor doesn't count you as unemployed. That's right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news -- currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren't throwing parties to toast "falling" unemployment.

There's another reason why the official rate is misleading. Say you're an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 -- maybe someone pays you to mow their lawn -- you're not officially counted as unemployed in the much-reported 5.6%.  (To read the full article, follow this link.)
One group not counted as unemployed also, is people who are retired.  I have members of my own family who retired early simply because they could not find work.  As a housing counselor, I see people all of the time who are retired but who did not want to retire. After losing a job and exhausting their unemployment benefits, they retired so they could draw social security. If a person looses their job at age 60, it is hard to find a job. After exhausting unemployment, they retire at age 62 when they had no desire at all to retire so early. Since we are experiencing a wave baby boomers entering their early sixties, the number of people in this situation is not insignificant. 

Labor participation rate, persons over the age of 16. Source: Bureau of Labor Statistics
Rather than focusing on the unemployment numbers, a better measure of employment may be that the labor participation rate is down to 62.9%, the lowest in decades. Even that figure however does not count the vast number of people who may have been successful professionals or skilled laborers who are now working for low pay, part-time.

Gallup says only 44% of the American people over the age of 18 have a "good job." Gallup defines a good job as working more than 30 hours a week hours for an organization that provides a regular paycheck.

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1 comment:

  1. it's Gallup's CEO who is fool or a liar about the unemployment rate. It's explained here:

    Unemployment data have defects? Yes, the same defects they've had for decades. And there's no credible evidence that BLS has fudged or faked the numbers, nor been subjected to political interference. btw, there is no single perfect economic indicator, so it's best to focus on several and to look at change rather than levels.