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Unemployment Figures Sometimes Hard To Figure Out
05.03.2004 5:22 PM EDT

On the face of it, measuring unemployment seems fairly simple. Count the number of people who are able to work, count how many of them don't have jobs, and divide that number by the first number. Done.

Wrong.

U.S. unemployment figures comes from a monthly survey conducted by the Labor Department. Every month 60,000 homes (thats about 1 in every 2,000 households in America) are called and asked how many people in that household are looking for work and how many have jobs. Those numbers are extrapolated to give a picture of the nation as a whole.

But a person without a job isn't automatically classified as unemployed. To be considered unemployed, someone has to be out of work and actively looking for a job at the time when the Labor Department calls. Folks who aren't looking at that particular time are dubbed "discouraged" but not unemployed. That's about 500,000 folks by the Labor Department's estimates.

Plus, there's no mechanism to account for the more than 4.5 million people who have taken part-time employment because they can't find full-time gigs. So if youre a computer programmer who gets laid off and ends up flipping burgers part time, the government calls these you "underemployed," but employed nonetheless.

If you added the "discouraged" and "underemployed" Americans into the standard unemployment statistic, it would climb to 10 percent, nearly double the 5.6 percent unemployment reported by the latest survey. Those numbers may seem alarming, but it's really not too shabby.

"In this economy, the amazing thing is that more people aren't unemployed, because the amount of job creation and destruction that takes place in any given year is really quite incredible," says New York University economics professor John Leahy, pointing out the formidable self-corrective tendencies of the U.S. economy. "Over the last 30 years, for instance, every year about 10 percent of manufacturing jobs disappear, and 10 percent are created brand-new, so if you applied that to the whole economy, that's like 15 million people every year losing their jobs and getting new ones. Those are huge numbers."

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So it turns out that employment figures are a lot trickier than you'd think. Just think, if only 60,000 households are called that means only about 1 in every 2,000. If you come from a town to 20,000 households, that means 10 households in your town represent the whole town. So, if thats not the best way to think about it, maybe a little history lesson in the booms and busts is vital to a real understanding of what's going on.

Historically, unemployment in American hovers around 7 percent, well above the March number of 5.7 percent. Unemployment hit its lowest point in 1944, in the height of World War II productivity, when it was 1.2 percent. It was at its highest a mere 12 years before, during the Great Depression, with 23.6 percent unemployment in 1932. But most of the changes haven't been as drastic.

"There has also been very low-frequency movement, changes over decades, that are harder to explain and predict," says Leahy, citing such potential contributing factors as the proportion of young workers to old ones, the inflation rate and even the prison population.

And we appear to be in one of those hard-to-explain periods right now. Until March's job boom, the U.S. economy was said to be in a "jobless recovery," a stretch in which all the normal indicators — such as interest rates and consumer confidence — point up, but job creation is still down.

"It's a new phenomenon, and we don't really know why," Leahy said. "In some sense, the [Bush] administration isn't to be faulted for having predicted that job growth was just around the corner, because based on past models, it would've been. It's like predicting where a cliff is. You know there's one, but you're basically right until you're wrong. This is a good version of a cliff."

But for those trying not to fall off the real employment cliff in the meantime, Leahy has a few words of wisdom — ones that may not offer immediate comfort, but likely paint a better long-term picture.

"It might not be that today is so bad," he said, "but just that yesterday was so amazingly good. Given the optimism of the 1990s, where the stock market was and all the hoopla over new technology, much of what's happening now could be a correction back to a more sensible, reasonable situation — normalcy."

—Choose or Lose Staff

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