Reprinted from MoneyNews.com
‘Real’ Unemployment Figure Nearly 10 Percent
Monday, Feb. 4, 2008 11:00 a.m. EST
Headlines trumpet what seems like good news: Unemployment rate dropped to 4.9 percent and the slowing U.S. economy shed only 17,000 jobs in December.
Ethan Harris, chief economist at Lehman Brothers, told the New York Times that a 17,000 job loss was "an incredibly tiny number” within a labor market of 138 million jobs. "It could be just a simple statistical quirk,” he said.
But, deeper in the report is more disturbing news. While most newspapers report only the headlines provided by the Bureau of Labor Statistics, the full report actually consisted of 31 pages. And, one line in a table on page 21 paints a more disturbing picture of unemployment.
"Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers” rose to 9.9 percent in January from 8.7 percent the month before.
"Marginally attached workers” is a bureaucratic word used to describe long-term jobless and discouraged. It is defined in the report as, "neither working nor looking for work but…they want and are available for a job and have looked for work sometime in the recent past.”
What the report describes as "persons employed part-time for economic reasons” are those looking for a full-time job but can’t find one and settled for part-time work.
In the broader context of an economy with 138 million jobs, there are thus actually more than 13 million unemployed or underemployed.
Even the headline number is misleading. Nearly 20 percent of the unemployed have been out of work for at least six months.
"You have to understand that 5 percent unemployment today is worse than 5 percent unemployment 10 to 15 years ago," said Jason Furman, a senior fellow at the Brookings Institution.
Another government agency, the Congressional Budget Office (CBO), issued a report in October 2007 warning that the long-term unemployment problem is growing.
"People are less likely to become unemployed than in the past, but those who do become unemployed are more likely to remain unemployed for more than half a year," the CBO report stated.
In what seems to be a growing economic trend, part of this problem can be traced to the subprime crisis: People aren’t moving for new jobs because it’s too hard to sell their home.
John Challenger, CEO of job placement service Challenger, Gray & Christmas, told CNN that widely publicized problems with mortgages and housing prices are making some job hunters reluctant to relocate for a new job since it may mean taking a large loss on their current home.
Providing data, he noted that 11 percent of job seekers relocated in the fourth quarter of 2007, down from 15.6 percent in the fourth quarter of 2006.
Summing up the current situation, Dean Baker, co-director of the Center for Economic and Policy Research, said "We are looking at a labor market already that is weak and set to get a lot weaker.”