Numbers Games

Undercounting Unemployment and its Consequences

Although unemployment data from the U.S. Bureau of Labor Statistics (BLS) have been less discouraging of late, the news would be far worse if the media reported the total number of Americans currently out of work. And if the number of Americans who are under employed or who work full time but earn poverty wages were reported widely on a regular basis, the U.S. economic outlook would appear worse still. Instead, the official unemployment rate reflects a rather narrow definition of unemployment and obscures debates that we should be having about the overall health of the U.S. economy and its ability to provide decent, family-supporting jobs to all its citizens. Arguments about how to calculate the nation’s unemployment rate aren’t new, but the issue has fallen off the public’s radar screen in recent years. Most Americans accept that the unemployment statistic is what it purports to be: an accurate assessment of those looking for work.

Mainstream media devote little attention to the limitations of the official unemployment rate, especially during periods of growth. During recessions, articles examining deeper economic issues may appear, but they almost never address just how many Americans are left out of the count-and how many others aren’t doing well by other measures. Many middle- and lower income Americans have a visceral understanding that the economy is worse than our official economists admit, but their knowledge is not reflected in the nation’s unemployment statistics. Even during the boom years of the mid- and late 1990s, income inequality expanded for many Americans, and lower income Americans with less education enjoyed fewer opportunities for meaningful employment than the headlines about record low levels of unemployment suggested.

The government first began collecting simple information about the nation’s unemployed in 1880, but it wasn’t until the Great Depression that efforts to collect unemployment statistics began in earnest. At the onset of that major calamity, estimates of the nation’s unemployed were unofficial and varied, often provided by private agencies. Inaccurate information about just how many Americans needed jobs made it more difficult for New Dealers to craft coherent employment policies. The depression firmly established the critical importance of more precise data, and the government instituted the monthly Current Population Survey in 1940. The CPS is a sample survey of (currently) sixty thousand households from which the official unemployment rate is derived. It was originally administered by the Works Progress Administration (WPA), a New Deal work relief program that ceased to exist in 1943, and it is now cosponsored by the U.S. Census Bureau and the BLS. The depression also gave birth in 1935 to our unemployment insurance system, which continues to provide benefits for unemployed Americans lucky enough to qualify. The system operates largely at the s...