On Feb 17, 2009, at 11:31 AM, Patrick Bond wrote:
> Doug, as you see below, Cockburn says there are major changes in
> unemployment beancounting...
>
> Patrick Bond wrote:
>> Doug Henwood wrote:
>>>> Wasn't that # constructed rather differently back then?
>>> Not really, no.
>
> http://www.counterpunch.org/cockburn02132009.html
>
> Every president since Reagan, particularly Clinton, has jimmied the
> unemployment criteria to produce an undercount. The actual number
> for the two months is nearer one and three quarter million. The
> actual total unemployment rate, according to statistician John
> Williams, by pre-Reagan criteria, rose to 18 per cent in January,
> from 17.5 per cent in December.
He says it, but he's citing the awful John Williams of Shadow Government Statistics, which is all wrong. I don't know how to say this more clearly - it's just not true.
<http://tlrii.typepad.com/theliscioreport/2009/01/calculating-the-unemployment-rate.html
>
January 27, 2009
Calculating the Unemployment Rate
Recently several news pieces have made the claim that if the unemployment rate were calculated as it was during the Great Depression, the current rate would be close to double what it is, and creeping toward the formidable rates back in the 1930s.
The first problem with this statement is that there was no official unemployment rate until the 1940s. The ones we use today were reconstructed after the fact. As unemployment ballooned during the Great Depression a number of ad hoc attempts were made to calculate the rate, and the widely divergent results led private researchers and some state and local governments to experiment with various sampling methods. In 1940 that the WPA began publishing statistics on those working (the employed), those looking for work (the unemployed), and those doing something else (hiding under the bed perhaps?) and so not in the equation.*
The second problem with the statement is that it's just not true. Although the BLS has refined their surveys and made questions more specific, conceptually the unemployment formulas have not changed, and the BLS's own analysis of test data shows that the impacts of several sets of changes on the overall numbers are minor.
In 1962 high unemployment and two recessions in three years led to the formation of The Presidential Committee to Appraise Employment and Unemployment Statistics, led by Robert Gordon, and tasked with reassessing the concepts used in gathering labor-market data. The Committee gave high marks to the BLS's integrity and suggested some improvements. For several years the BLS tested new survey techniques and instituted a number of changes in 1967.
Among the most important of these were the requirement that workers must have actively sought employment in the last four weeks in order to be classified as unemployed. A contact at BLS agrees that some discouraged workers were probably counted as unemployed before this change was made, but the effect of this migration is small. As they generally do, the BLS ran the new definitions alongside the old, in this case for 2.5 years, before adopting the new. Although the test series is not entirely comparable with the new series, the overall unemployment rate in the new series dropped by just one-tenth of a percent and, within that, the rate for adult men was down 3/10th, up 4/10th for adult women, and off a full point for teenagers. (Maybe they were just being teenagers: the requirement that they give a concrete example of their job search may well have reminded them of their parents and got the blank stare.) The Committee also recognized the need for more detailed data on persons outside the labor force, who are highly sensitive to changes in labor demand, and the BLS began collecting information on those who wanted a job although they were not looking for work in 1967.
In 1976, in order to provide more information on the hidden unemployed (who would presumably be part of the labor force in a full-employment scenario), the BLS first published the original U1 to U7 tables, which break out marginally attached workers. These tables were revised in the 1994 redesign (becoming U1 to U6) and the controversial requirement that discouraged workers must have sought work in the prior year was added. This change halved the number of discouraged workers, resulting in a complete break in the time series.
But those workers can still be found in the U-6 series, which is the broadest measure of labor underutilization, and it ain't a pretty sight. Up 4.8% over the year, U-6 currently includes an ugly 13.5% of the labor force. There's no need to fool around with the official unemployment rate (U3) to get an accurate picture of how quickly our labor market has deteriorated: the U1 to U6 tables tell the story.
Philippa Dunne and Doug Henwood
*There is currently a bit of a fracas over the reconstructed unemployment rates for the period prior to official series. Stylish Stanley Lebergott, the BLS economist who put together the most widely used series, categorized workers on emergency relief as unemployed. In the 1980s data reclassifying these workers as employed were released, a definition in line current practice and more widely accepted. In the past month or so, those wishing to show the WPA programs did little to alleviate unemployment have been relying on the unrevised Lebergott series, and those taking the opposite view the revised data. Of course, if you compare the two series it appears that between 1934 and 1941 WPA projects took 2 to 3.5 million workers off the unemployment roles, and shaved the rate by 4 to 7%.