‘Official’ job numbers don’t tell the whole story

John W. Schoen Senior producer • Profile • E-mail

Government jobs data are only estimates. The "official" numbers don't include everyone who wants and needs a fulltime paycheck.

I want to know why the government/news does not report the unemployment rate correctly? Counting people who are no longer collecting unemployment, never received unemployment because they didn’t qualify or people who are working part time just to have a little income - it’s more like 19-22 percent. Why don’t they report honestly?
- Ruth W., Texas

The data is there if you’re willing to dig for it. Unfortunately, as you point out, the “official” unemployment rate badly understates just how truly awful the job market is right now. And since most news reports rely on that “official” number, the real picture is not widely understood.

One reason for this is that discussions about the “real” unemployment rate often degenerate into a rant about the government’s inability to collect accurate statistics. As we’ll see shortly, the data are all there for anyone who wants to look.

As for why this story isn’t reported “honestly,” we tend to give the participants the benefit of the doubt. It’s entirely possible that government statisticians put their thumb on the numbers to make them look “better” than they really are. In our experience, the folks at the Bureau of Labor Statistics take their work seriously and try to get it right. So do most of the news outlets that report the “official” number every month. Unfortunately, in a deep recession, that number just doesn’t tell the whole story.

So let’s take a deeper dive past the so-called “headline” number. The BLS publishes various series of jobs data every month, based on two separate surveys. The “household” survey, which covers only 60,000 households a month, asks people whether they have a job, or are looking for a job, or have given up, or gone back to school, or retired.

The problem starts with the official definition of who is unemployed. For example, if you’ve decided that you’re never going to find a job like the one you lost, and you go back to school to get retrained, you’re not in the work force, and you're not unemployed. Likewise, if you’re in your late 50s, and every potential employer tells you you’re just too old or overqualified, you may give up looking and hope your savings will carry you over until you can collect Social Security. In that case, you’re considered “retired” — again, not unemployed.

Since 60,000 households is about four one-hundredths of one percent of the total work force, the results are then subject to a variety of statistical adjustments, just like any survey.  Same goes for the separate “establishment” survey, which contacts roughly 150,000 business and government agencies to find out how many people are on the payroll that month. It’s a little broader, which is why most people believe the payroll survey is more accurate. But it still gets hit with a heavy round of adjustments. And that’s when things start getting a little murky.

When the economy is humming along smoothly, these adjustments tend to be relatively minor. But in the worst job market since the Great Depression, the data get much more difficult to pin down. The payroll survey for last month, for example, showed 263,000 jobs lost. But the household survey logged a drop of 710,000.

Worse, the BLS announced last month that it probably understated job losses this year by more than 800,000, in part due to an adjustment known as the “birth/death” model that tries to estimate the number of small businesses that go in and out of business each month. It turns out that in a deep recession the model doesn’t work very well.

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