Initial jobless claims fell by 24,000 last week, a better-than-expected decline that brought the four-week average to its lowest level since September 2008, when the financial meltdown kicked into high gear.
This is good news, but it should be viewed in context. The official unemployment rate still hovers above 9 percent, where it has been stuck for the past year and a half. The real unemployment rate is much worse. The government cooks the books, in order to report a lower rate. It doesn’t count the “invisible unemployed” – those who have stopped looking for work altogether.
Who makes this shocking accusation? The Chairman of President Obama’s Council of Economic Advisors, Austan Goolsbee, among others. As an email from Republicans on the House Ways & Means Committee pointed out today, Goolsbee made this observation in a New York Times op-ed back in 2003, when somebody else was President. He was upset by the Bush Administration reporting 6% unemployment that was truly closer to 8%. Using the same standard, today’s figure would be over 11 percent.
The Bureau of Labor Statistics puts out a golf bag full of different unemployment metrics, from which politicians can draw whatever club they need to beat their opponents. In their latest cheerful news release, the October 2010 figure for the U-3 measure is 9.6%, including seasonal adjustments. The U-3 number is the one you generally hear cited in the media. There are three broader standards, with the U-6 figure including “all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.” If you are “marginally attached to the labor force,” this is the number that would most interest you… and for October 2010, it stood at seventeen percent.
What constitutes “marginal attachment to the labor force?” Take it away, Bureau of Labor Statistics!
“NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.”
That certainly sounds like the number we should be paying attention to, doesn’t it? It’s the only figure that includes all of the unemployed. Whoa, wait a second… no, it doesn’t. Read that first sentence again. What about people who haven’t looked for work sometime in the past 12 months?
You don’t have to worry about them, because they were officially ruled out of existence in 1994. It’s a good thing, too, because if they still existed, the true unemployment rate would be close to 22%.
The drop in new unemployment claims is definitely welcome news. The incoming Republican team at Ways & Means says the real unemployment numbers are a good reason not to raise taxes, by allowing the Bush tax cuts to expire. If their advice is not heeded, we’re going to have to define a lot more unemployed people out of existence to keep those numbers down.