Facts and fictions about measuring unemployment
Date posted: January 30, 2012
Some say that the unemployment rate is based on the number of people qualifying for unemployment compensation and that, therefore, once jobless workers stop collecting unemployment compensation they’re no longer counted as unemployed and, as a result, the real unemployment rate is much higher than the reported rate. But, as N.C. State University economist Mike Walden explains, that’s not the case.
“The unemployment compensation numbers are a separate set of numbers and actually have nothing directly to do with how the unemployment rate is measured. The unemployment rate is measured from a separate, stand-alone survey of the population done by the federal government, where they go to a sample of households and collect information about the work status of those households. Totally separate. Totally unrelated to unemployment compensations.
“So for example, when it is said that once someone stops getting unemployment compensation, even though they don’t have a job, therefore they’re not counted as unemployed, that’s not correct. One has nothing to do with the other.
“Now, that said, there certainly are some things to remember about how unemployment is measured. Actually the federal government releases six — six — different unemployment rates each month: the what-we-call … headline rate, the rate that gets the most attention; to be counted as unemployed, there you have to meet a fairly strict standard. You have to be unemployed. You have to want to be employed, and you have to in the last month have been going on job interviews or sending out resumes or contacting potential employers. If you don’t do that last thing, you’re not going to be counted as unemployed. And that’s received a lot of criticism, but the federal government doesn’t hide those folks.
“There is another measure of unemployment, which includes those folks that’ll add about a point to a point and a half to the unemployment rate. And then there’s a further measure of unemployment, which includes people who are indeed working, but they’re working, they’re so called under-employed. They’re working part-time only because they can’t find full-time work. If you look at that number, that measure which is a broader measure of unemployment, is about 16.5 percent.
“So the numbers are out there. You just have to know where to look and have to understand how they are calculated.”
Category: Economic Perspective