By Sean Higgens
(Investor’s Business Daily)
A Record 2.81 Million Including this group, jobless rate is 9.9% vs. the official 8.3% figure
The official unemployment rate has improved, but the number of jobless Americans at the fringe of the workforce has never been greater. The gap between headline and alternative joblessness is the highest on record, according to an IBD analysis of Labor Department data.
The jobless rate is 8.3%, still high but down from 9.1% last August and 9.9% in April 2010. But many don’t think that gives an accurate picture. The official number excludes a record 2.81 million discouraged or other “marginally attached” people out of work that aren’t currently looking but are willing and able.
Factoring these people in, unemployment is a much higher 9.9%, 1.6 percentage points above the official rate. That’s the widest gap on record going back to 1994. It never rose above 1.1 points during the Bush administration.
That means the official rate has been falling in part because an unprecedented number of people are taking a break from searching for work.
“The labor market has weakened so much you’ve just had more and more people falling into that group,” said Heidi Shierholz, labor market economist with the liberal Economic Policy Institute.
Some lawmakers say it is time that the government started paying more attention to them.
Rep. Duncan Hunter, R-Calif., plans to introduce a bill soon that would force the Labor Department to include the marginally attached in the official number.
“Guys like me want a way to know what the unemployment rate really is. It is that simple. The unemployment rate is not really the 8.3% figure,” Hunter, a member of the Education and Workforce Committee, told IBD.
Labor already tracks at least half a dozen variations in the jobless rate publicly released each month.
‘Marginal’ Workers Left Out
The official rate is called the “U-3” number. The one including the marginally attached is the “U-5.” That one also includes: “discouraged workers, plus all other persons marginally attached to the labor force.”
The “marginally attached” are defined as those that want to work and have sought employment within the prior year but are not currently looking.
Hunter’s bill would just make U-5 the official number. “I don’t think most people even know there is an alternate way of calculating unemployment,” he said.
Economists of all stripes agree that it is arbitrary for U-3 to be the official rate. A sound case could be made for any of the others, though most argued that no one figure should be spotlighted.
GOP lawmakers may have political motives to cast President Obama’s economic record in the worst possible light.
But Wayne Vroman, senior fellow at the Urban Institute, notes that the idea of changing the statistic to the U-5 number has a bipartisan pedigree.
“A lot of advocates from the left side of the political spectrum also would want to give (the higher statistic) more prominence because it shows distress among a group that doesn’t get as much attention,” Vroman said.
Surprisingly little is known about the marginally attached. With less than two decades of data, few economists can say much except that the group is very diverse, with many reasons as to why they drop out. Some may have other means or a working spouse, or are retiring early.
Many have quit looking after months or years out of work. Average duration of unemployment was 40.1 weeks in January, just below November’s record 40.9 weeks.
The labor force participation rate has fallen to multi-decade lows even as hiring has slowly improved in recent months.
That may reflect baby-boomer retirements in part, says James Sherk, a labor economist with the conservative Heritage Foundation. But even taking that into account, “the labor force participation rate has fallen even more than you would expect.”