Is the official unemployment percentage used by the media and Washington???and, basically, everyone in the world???misleading? For months, California congressman Duncan Hunter has argued that the data we use doesn???t accurately reflect the true stark unemployment picture.
Increasingly???and regrettably???Americans are learning a lot about the intricacies of unemployment statistics. The U.S. Labor Department offers six categories ranging from U-1 to U-6. Presently, the standard is U-3, a number that measures unemployed by those who are looking for work and have done so in the past four weeks. This doesn???t account for discouraged workers, ???marginally??? or ???loosely??? attached workers or those who ???would like??? to work but do not. Hunter would like it to reflect those numbers.
The call for a change is partly driven by the fact that labor force participation is shrinking rapidly and the depth of unemployment is often lost in the unemployment rate. A few months ago, the unemployment rate actually dropped even though we added only 120,000 jobs. If we had the same number of Americans in the workforce today as we did when Barack Obama became president, the unemployment rate would be 11 percent. If we calculated unemployment using the workforce when George W. Bush first became president, the rate would be around 13 percent.
If the Hunter???s Real Unemployment Calculation Act???which now has 21 sponsors???passes into law, it would change the official measurement the Bureau of Labor Statistics to U-5, which includes people who looked for work in the past year, adding in ???discouraged workers??? who have dropped out of the work force altogether. If this were the number, the unemployment rate would be nearly 10 percent.
What is the most useful measure? ???Listen, a lot of people have different have a lot of different ideas on this,??? Hunter says. ???Some say even the number I???m suggesting is too low and that real unemployment could be anywhere between 15-20 percent. The bottom line is that the number should be much higher and the American people know it.???
Tied to benefits
There are potential problems with this change beyond picking a calibration. For one, the official unemployment number is more than just an indicator, it is often tied to benefits and other legislation. Hunter???s office says that federal payouts are most often not directly linked to increasing unemployment rates. They say that informal, back-of-the-napkin calculation from the Congressional Budget Office confirms that taxpayer exposure would not be significantly higher if the bill was enacted.
With passage unlikely, however, the more important question is: does it matter? ???I think we???re starting to bring attention to this issue,??? Hunter explains. ???I have not gotten a lot of feedback from leadership. I???m not sure why, frankly. And I???ve said before, this isn???t a partisan issue, because in the end everyone in Washington???including Congress???looks bad. It???s just the harsh reality. And we owe the American people some honesty.???
Yes, incumbents would be damaged by a higher???and uglier???official unemployment number in the short term. One assumes, though, that Americans would soon become acclimated to new data points and regularly seeing an 8 percent unemployment rate???rather than, say 5 percent or 6 percent (should we be so lucky again)???would become the new normal. And though each of these numbers tells us something slightly different about the unemployment picture, historically they all trend in unison. It???s the job of the journalists and citizens to put data into context, because no number on this issue will ever be perfect.