It’s an absolutely crucial economic measurement, yet even the wonkiest among us are left wondering, “How is unemployment calculated?”
Republican presidential candidate Donald Trump has called the official U.S. unemployment rate of 5.1 percent, a seven-year low, “the biggest joke there is in the country.” He went on to claim that unemployment was actually somewhere along the spectrum closer to 42 percent.
Well, while I’m not an economist, nor do I entirely have knowledge of Trump’s statistical methods, I do have access to certain public documents, which explain in overly clear detail, exactly how our government goes about calculating the number of our unemployed fellow citizens.
Settle down, get comfortable, clear your schedule. This is going to take a while. Well, like a minute, but still.
Let’s talk to some strangers
Our government delivers unemployment numbers to us every month, but it doesn’t go through the tedious, expensive process of going to every single household in the country and asking whether you’re employed. Instead, the government runs a monthly survey called the Current Population Survey (CPS), and the responses of this survey are used to calculate national unemployment.
The CPS has been conducted every month in the U.S. since 1940, and has been expanded and modified several times since. Currently, the survey takes a sample of about 60,000 households, roughly 110,000 individuals, as representative of the U.S. population.
Now, before you go about decrying the number as being too small and centralized to represent the diverse population of the United States, do bear in mind that the sample population spans the entire country. Every county and independent country gets grouped into one of 2,000 geographic sample locations, which are then drawn upon by equal measure for the survey’s 60,000 household sample population.
As for the survey itself, it doesn’t ask the subjects directly whether they consider themselves unemployed. That is subject to some variability, not to mention I know of very few people who would willingly admit they’re unemployed to a stranger.
Instead, the CPS asks a specific set of questions based on current activities and decides a responder’s employment status based upon certain criteria. The survey treats everyone ages 16 and up as part of the eligible participants, but people in nursing care, a correctional institute, active military service or a mental healthcare facility are excluded.
Your current status as judged by the CPS can be one of three options:
-Not in the current workforce
You count as employed even if you’re doing any work at all for pay or profit during the survey’s reference week. This includes part-time and temporary work, as well as regular full-time employment.
You are also counted as employed even if you didn’t work during the survey’s reference week if you were:
-Happily drinking a margarita on vacation
-In your pajamas watching Netflix while sick
-Experiencing child-care problems
-Experiencing the miracle of life first-hand while on maternity/paternity leave
-Taking care of some other family or personal obligation
-Involved in a labor dispute
-Prevented from working by bad weather, like the entire city of Boston last winter
Out of sight, out of work
You count as unemployed if you don’t have a job but are actively looking for a job in the prior four weeks and are currently available to work. Likewise, if you’ve been laid off and are expecting to be recalled, you still count as unemployed regardless of whether you’re looking for a new job. If this seems a bit narrow bear in mind that the results include:
-The number of people who have lost jobs
-People who have quit their jobs to look for other employment
-Workers whose temporary jobs have ended
-Individuals looking for their first job
-Experienced workers looking for jobs after an absence from the labor force
As for the third classification, wherein you’re not considered a part of the workforce, then you’re probably currently in school or retired. This is usually pretty straight-forward.
Going gray, discouraged workers
There is a gray area however, when it comes those referred to as “discouraged workers.” These people are not looking for work due to any of the following:
-They believe no job is available to them in their line of work or area
-They had previously been unable to find work
-They lack the necessary schooling, training, skills, or experience
-Employers think they are too young or too old
-They face some other type of discrimination
The “discouraged worker” classification is where things tend to get a bit murky when it comes to calculating unemployment. Being unable to find work due to market demand sounds a lot like being outright unemployed, as defined by the survey.
Now, if this number was significant and undefined, then we might have a serious problem. However, according to a September report by the Bureau of Labour Statistics, that number can’t be any higher than 635,000. Compared to the unemployment numbers of 7.9 million recorded in the same report, that’s pretty much a half percentile difference even if we lumped them all into “unemployed” – not exactly a 40 percent spike in the numbers.
I’m willing to leave the matter as a fine way to record workplace discrimination or the changing needs of the marketplace. You are however, free to lump that number into the whole unemployment calculation if you’d like to get a broader number on things. It just won’t change the answer too much.
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