Unemployment games

Unemployment rate: how bad is it?

     The Bureau of Labor Statistics released its latest figures which reveal that more people are out of work than last month, or for years before. The rate for the state, corrected for the season, is 9.3%, up from 8.4% in November. California is in the top five most unemployed states. Sierra County’s unemployment rate is a modest 13%. That places the county 44th in the state, well behind Imperial at 58th and almost 23%.

     What do these numbers mean, and how accurate are they?

     The Bureau of Labor statistics is happy to explain how they define their terms and the methodology used to determine the unemployment rate here and here. They describe a broad methodology using several techniques to determine what the unemployment rate is. Regardless the dazzling mathematics behind the numbers, eventually one is forced to do a calculation something like this: number of people not working divided by the number of people in the job force times one hundred. This forces these definitions: work force; employed; unemployed; discouraged. How you define these "variables" makes all the difference.

     Discussions like that aren’t very interesting reading for most of us, but what is interesting is that plenty of people disagree with the definitions and methodologies used.

     One is former Secretary of Labor Robert Reich, who last December stated he believed the unemployment rate nationally is not about 7% as reported, but closer to 11% or more. Read his blog HERE http://robertreich.blogspot.com/

     Let’s take a look at how these definitions work.  We'll take five hypothetical people.

     One is a stay at home mom who handles telephone orders for a large company from her house for three hours a day while her kids sleep. For this, she makes $24.00 a day. She is employed.

     The next is a man who used to earn $25.00 an hour working long hours in the woods. He now works sixteen hours a week as casual labor for $10.00 an hour. This lucky fellow is employed.

     Next is a woman who took retirement at age 58 because she simply couldn’t find work. She needs to work ten more years, she has no health benefits and her retirement, because she took it early, doesn’t cover her needs. She is not in the work force. She wants to be, and if she could find work she’d stop her retirement (probably with a penalty), but she can’t so she’s out of the workforce. By retiring, she has reduced unemployment because she is no longer in the work force.
     As an aside, chances are not good for this woman to ever return to the kind of work she did.  Each year that passes she is older, and her period out of the work force is longer; it is unlikely her situation will improve.

     The fourth "pretend’ person is a young man with a high school diploma. He will do anything for money and is homeless, sleeping with friends, in his car, in garages. He is not unemployed because he has no address and is not in the labor force as a result.
    If the same young man was living with his mother but not looking for work because he is "discouraged," he would still not be unemployed, because he wasn’t looking for work and so not in the work force. If he looked for a job, he would become unemployed.

     Finally, a young woman who leaves Sierra County to live and work in Reno. She has reduced unemployment in Sierra County by leaving.

     None of these people are unemployed. To be "unemployed" you have to not have any income from your efforts, and you must be actively seeking work.

     Just as there are no unemployed people among our examples, the unemployed disappear from the BLS statistics.

     To be fair, the BLS does try to track "marginally attached workers" here  in the formulation known as "u-6" but the number is still far lower than many including Reich think it should be.

If we take the 13% unemployment rate Sierra County has been assigned and put some of those not-employed and under-employed people back in, the rate climbs quickly. Most likely, one in four of us in the county isn’t working, but would like to, or would like to work enough hours to pay bills.

Reich asks a good question: Are we in a depression yet?

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