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Edited on Mon Mar-09-09 09:26 AM by pinqy
Every month without fail, some idiot will ask about the "real" unemployment rate or claim that the figures are bogus (for whatever reason) or claim that people not collecting Unemployment Insurance aren't counted. So an overview is needed so I can just link here to save myself the trouble of rewriting the same rebuttals every month.
First up is collection: Every month the Census Bureau does a personal interview at approximately 60,000 households across the country asking a long questionnaire about labor market activity. Using statistical methodology refined over the years, the results are aggregated to represent the nation as a whole.
Concepts: Not everyone in the country can participate in the Labor Market, so the Population used is the "Civilian Non-Institutional Population" consisting of everyone age 16 years and older who is not in prison, or the military, or long-term mental health or other long term health facility. From 1984-1994 military personnel stationed domestically were included in one version of the official figure.
Employed: "All persons who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. For purposes of occupation and industry classification, multiple jobholders are counted in the job at which they worked the greatest number of hours during the reference week. Included in the total are employed citizens of foreign countries who are temporarily in the United States but not living on the premises of an embassy. Excluded are persons whose only activity consisted of work around their own house (painting,repairing, or own home housework) or volunteer work for religious, charitable, and other organizations." This definition has not changed since 1957.
Unemployed: "All persons who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed."
Before 1967 this definition did not include the 4 week search period and included those who "would have been looking for work except that they were temporarily ill or believed no work was available in their line of work or in the community."
Before 1994 this definition also included those who "were waiting to report to a new wage or salary job within 30 days (and were not in school during the survey week" whether or not they had looked in the last 4 weeks.
Together the Employed and Unemployed comprise the "Labor Force;" those who are participating in the Labor Market. Everyone else is "Not in the Labor Force" because they are not actually participating.
The Official Unemployment Rate is the number of Unemployed divided by the Labor Force. The usefulness of this measure is to see how successful or unsuccessful people are at finding work.
Alternative measures are also published each month to show different aspects.
"U-1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force." This is useful as a look at long term unemployment. At any point in time there's a degree of "frictional unemployment:" people temporarily in between jobs, but the U-1 looks only at those still looking for work after more than 15 weeks.
"U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force" This is the percentage of the Labor Force who lost their jobs in that month. Quits are not included. I would think this is a good number to look at right now.
"U-3: Total unemployed, as a percent of the civilian labor force (official unemployment rate)" Already discussed.
"U-4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers" Discouraged workers are "persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify." This is closer to the pre-1967 definition and is useful for looking at potential, though currently unavailable sources of labor. The 12 month requirement was added in 1994. This is a very subjective measure.
"U-5: Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers" Marginally attached workers are those who want and are available and have looked in the last 12 months but are not looking now for any reason. This group was not calculated until 1994 and represents another potential source of labor IF the circumstances change. Discouraged workers are a subset of the marginally attached. Again, this is a very subjective measure.
"U-6: Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." 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" because of either slack or changing business conditions or because no full-time work was available. It does not include people who work part-time due to family or health issues. This is the broadest measure and is useful for looking at total underutilization. It's extremely subjective especially when you consider that under this measure a person who works 15 hours a week because they can't afford full time day care is considered "Employed" while someone who is temporarily working 34 hours because business is slow is considered "Unemployed." I don't think anyone really wants an official definition that has an Unemployed person working more than twice as many hours as someone who is Employed. Nonetheless it's still a good look of the overall perceptions and difficulties of the labor market.
Also available in the Employment Situation report are detailed numbers of length of unemployment, separation of the Unemployed into people looking for work and people on temporary layoff, people who quit their job and people entering the Labor Force for the first time and those re-entering the Labor Force.
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