Shredding the Silence Surrounding the Slack

Every month, without fail, the Bureau of Labor Statistics (BLS) releases info on the status of the nation’s labor markets. The report just released on August 7th, 2020 opens with the following words:

“Total nonfarm payroll employment rose by 1.8 million in July, and the unemployment rate fell to 10.2 percent.” Those are the numbers—1.8 and 10.2—that most of with in various media. And, of course, they’re the numbers that come rolling off the tongue of Trump and leaping from the lips of administration officials. They’re also quick to add that the overall unemployment rate declined 0.9 percentage points between June and July (each report refers to the previous month; so, the August report, for instance, refers to July’s labor market). So, overall, the news looks good or at least not too bad: The unemployment rate is going down. Good deal, right?

Well, yes but….

Take a peek at Figure 1.

I’ve pulled that, and the following figure, from a blurb from the research outfit Brookings . Cast your eyes, for a minute, on that bottom line. That line tracks long-run changes in the nation’s unemployment rate. The grey bars represent years of recessions. Years in which in the economy was tanking. When you look at that bottom line—the line tracking unemployment—you see that it bounces around, tending to rise during economic downturns and fall during economic recovery periods. Nothing surprising there. When the economy is popping, we expect joblessness to decrease and when it’s plopping, we expect joblessness to increase.

Stay with me for a moment, though. Just what criteria must one meet to be included in that bottom line, the line tracking the unemployment rate. If you’re thinking that you must be without a job to included in the unemployment count, well, you’re right. If you’ve got a paid gig, then statisticians don’t include or count you amongst the unemployment. So, yeah, the first criteria you’ve got to meet is that you’ve got to be gig-less; you must be jobless.

But it’s not quite that simple. In addition to being jobless, you must also have actively searched for a job. Say, for instance, you’re jobless-- but while you’ve looked for employment in the last 12 months, you haven’t done so within the four weeks preceding the survey that counts the number of persons unemployed. Well, guess what? According to the government statisticians, you’re not unemployed. You may think you’re unemployed. Your friends might consider you unemployed. Your loved ones might consider you unemployed. You may experience a hard time paying your bills. You may be stressed out. You may have more month than money. But you’re not unemployed. At least that what Uncle Sam says. You’re what the BLS considers a “marginally attached” worker and, for purposes of calculating the number of jobless folks, you don’t make the count. You’re not included in that bottom line.

But suppose, instead, you’re working part-time. Some people dig that. They want to work part-time. It opens space for them to do other things they enjoy. Paint. Read. Hobbies. Volunteerism. You name it. For these reasons, they’re good with it. But there are others who work part-time but desire full time work. A part-time gig ain’t cutting it for them. They’re constantly behind in their bills. Jacking Peter to pay Paul. Stressed. And miserable. They’ll leap at the prospect of a full-time job, especially one that offers something most part-time gigs don’t. Benefits. Uncle Sam’s statisticians slides these people into the category of “working part-time, economic reasons.” And like the “marginally attached,” they are completely irrelevant for the purposes of calculating the nation’s unemployment rate. They too are not included in that bottom line in Figure 1.

And here’s the deal: By excluding both the “marginally attached” and those working part-time involuntarily, the official unemployment rate—that bottom line in Figure 1—underestimates the extent of labor market distress. By excluding two groups, the unemployment rate misses the misery that too often characterizes the labor market.

THE UNDEREMPLOYMENT RATE

Now, look at that top line in Figure 1. That’s the underemployment rate and it is calculated by adjusting the count to include three groups:

1. The official unemployment

2. The Marginally attached

3. The Involuntary part-time

While it tracks the unemployment rate, rising during economic recessions and falling during economic recoveries, it is consistently higher than the official unemployment rate. At the peak of the Great Recession, the unemployment rate was 10 percent. But the underemployment rate was 17 percent!

And that 10.2% July 2020 unemployment rate that Trump is trumpeting is swamped by the 16.5% underemployment rate reported for that same month.

So, while the focus is invariably on the unemployment rate, consider shifting the narrative.

In your churches

In your fraternities

In your sororities

In your homes

Every time you hear 10.2% this month, think 16.5% Think about the people who are not in the count. Think about the dude who wants a job but has become so despondent he’s no longer looking. Think about the sister working part-time but desiring a full-time job that provides her decent wages, benefits, and protects her human dignity. They may not count in Uncle Sam’s stats. But that doesn’t mean they shouldn’t count to us.

The official rate smothers what’s really going on. The official unemployment rate masks the true extent of labor market slack.

There’s way too much silence surrounding the underemployment rate.

Let’s shred the silence surrounding the slack!

Catch you on the rebound,

Doc Greene