Government’s Own Monthly Jobs Report Puts Real Unemployment Rate Near 32%

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by Aegidius25

The Bureau of Labor Statistics (BLS) put out its most recent report on the unemloyment situation today. I’ve long had a problem with the numbers this government agency puts out. Over the years they have been brazenly manipulated and much of the data it purports to show isn’t much more than a glorified guess. The report is made up of at least two elements; first the household survey from which it gets the official unemployment rate (6.7% for November) and second a so-called establishment survey.

The first is just what it sounds like, an in person or telephone survey of US households compiled to figure out what proportion of workers in the labor force are employed. By contrast the establishment survey is a combination survey and guesstimate. The first element surveys about 144,000 business establishments and government agencies compared to the about 32,500,000 businesses that used to be estimated to exist in the US; collecting data on numbers of workers at each firm, their hours worked and earnings. The second element is essentially a fancy formula used to guess at the number of new business establishments created or destroyed in the unsuryed segment of the economy. (Note: It is likely the number of surveyed firms has also declined with the downturn.) From here the BLS comes up with an average number of jobs created or destroyed with all of these firms, giving us by far the biggest part of this figure in this survey. (+245,000 in November). But these numbers don’t capture the whole picture.

First because they only survey workers considered in the labor force as noted above. This means workers who have been out of work for a period considered too long by the government and whos unemployment benefits have run out are no longer counted as unemployed, which affects the laborforce participation rate at 61.5% (-0.2% for November).

According to this segment of the report transportation and warehousing was the largest contributor to the month’s reported job gains (+145,000) followed by professional and business services (+60,000), the health care sector {+42,000} and construction (+27,000). However when you take into account that about half the positions in the professional and business services field were in a category with only temporary staying power (temprorary help services) we can assume many gains are at best transitory.

Second all data in this report is SEASONALLY ADJUSTED; which sounds like a means to take seasonal factors into account when calculating its data, but ts really a practice by which they create long-run averages to compare current data to. Any deviation above the average is considered growth while any deviation below this average is considered a contraction. The downside to this is that it can misrepresent the actual situation. Say the economy’s been in a slump for a prolonged period and the average of jobs lost each month is -300,000. Then any number above -300,000, even if still negative at say -100,000, because it’s above the long-run average is still counted as a positive number with 200,000 jobs created in this scenario. While if the number were really -400,000 for a given month it would be ADJUSTED to a loss of merely -100,000. The same goes for positive numbers; with an average of +300,000 jobs a month any number above that, say +400,000, is ADJUSTED to show a positive 100,000, while anything below that is considered negative. For example +200,000 jobs a month is actually ADJUSTED TO A -100,000. The same sort of averaging also applies to the unemployment rate and all other economic date from the government. So we can see how unreliable much of this data is.

Additionally this month the BLS reported that “[t]he collection rate for the establishment survey was 74 percent” five percent lower than October while “the household survey response rate was 79 percent in October, considerably higher than the low of 65 percent in June but below the average of 83 percent for the 12 months ending in February 2020.” (The Employment Situation for October 2020 p. 5) Though one has to wonder at the sample sizes corresponding to these response rates given that

Meanwhile ”[s]ince March, household survey interviewers have been instructed to classify employed persons absent from work due to temporary, coronavirus-related business closures or cutbacks as unemployed on temporary layoff. As happened in earlier months, some workers affected by the pandemic who should have been classified as unemployed on temporary layoff were instead misclassified as employed but not at work. However, the share of responses that may have been misclassified was highest in the early months of the pandemic and has been considerably lower in recent months.”

“For March through October, BLS published an estimate of what the unemployment rate would have been had misclassified workers been included. Repeating this same approach, the overall November unemployment rate would have been 0.4 percentage point higher than reported. However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.” (November BLS Report pg. 6)

A better if still imperfect measure of the jobs situation can be found in a measure in the BLS report called the Employment-Population Ratio. This number, if still seasonally adjusted, tries to compare the actual number of people with a job to the entire working age population of the United States. Unfortunately it fails to take into account the number of say stay at home mothers, who actually are not in the labor force, but in our modern world this is such a rarity that statistically it shouldn’t impact the overall data too much. However neither does it take into account the number of retirees. This is easily corrected by finding what percent of the population is retired and subtracting it from the remaining number of people without a job. In this month’s BLS report the EMPLOYMENT-POPULATION RATIO IS A SEASONALLY ADJUSTED 57.3 (-0.1 in November). THAT MEANS 42.6% OF PEOPLE 22 AND OLDER ARE WITHOUT A JOB. IF WE SUBTRACT THE ABOUT 14% OF THE POPULATION THAT RECEIVES SOCIAL SECURITY WE GET A RATE OF JOBLESSNESS AT 28.6%. Though this figure isn’t modified to count disabled adults who’d like to work, elder workers collecting Social Security but who still have to work, or people who really aren’t disabled but added to the Social Security rolls during the Great Recession to keep them out of the unemployment figures. WHEN WE CONSIDER ALL THESE PEOPLE THE ACTUAL REMAINDER FROM THE EMPLOYMENT-POPULATION RATIO IS PROBABLY NEARER 31.6. THAT IS TO SAY ABOUT 32% OF WORKING AGE AMERICANS ARE WITHOUT A JOB.

This is a far cry from the 6.7% unemployment rate reported by the government. Below is a link to this month’s employment report for any that are interested. www.bls.gov/news.release/pdf/empsit.pdf

 

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