The January unemployment numbers will be released very soon, and if the unemployment rate goes down, it might not be all good news. Conversely, if unemployment were to go up, it may point to a little more optimism in the workforce. It’s important to look deeper into the numbers to get a clearer picture, and to understand how unemployment numbers are figured. It also helps to know why “seasonally adjusted” unemployment figures are more useful than “raw” data.
The reality is unemployment in California and the nation is measured by a very strict definition: all workers who are available to work, currently unemployed, and who have looked for work in the last 30 days. So anyone who may be out of work for more than a month and hasn’t looked for work in the 4 weeks prior to the survey isn’t counted. These people are called “discouraged workers,” meaning they most likely have given up on the job search, at least temporarily.
That is why the County’s unemployment rate can go down even when the number of unemployed workers, as they are counted by the state and federal government, goes down, too. It means more people have ended their job search, so they’re not counted anymore for statistical purposes.
That is also why, if unemployment were to go up, it could mean that more workers are starting to view the job market as more favorable, and therefore are starting to look for work again. If more long-term unemployed people are renewing their job searches, it then raises the unemployment rate.
Accuracy in counting discouraged workers is difficult to achieve, but the U.S. Department of Labor (DOL) has estimates for this definition of unemployment at the state and national level. DOL believes this number to be relatively small compared to the larger unemployment number, but that may not be accurate today, given the number of long-term unemployed and the current job market.
In addition, DOL measures “marginally attached workers,” referring to long-term unemployed who have looked for work in the last year, but not in the last month. They estimate this number to be significantly larger than the discouraged worker category.
Actually, there are several definitions for unemployment, or “labor underutilization,” as the DOL likes to call it:
· U-1 – is persons unemployed 15 weeks or longer, as a percent of the civilian labor force, who have looked for work in the previous 4 weeks;
· U-2 – is persons laid off and persons who completed temporary jobs, as a percent of the civilian labor force, who have looked for work in the last month;
· U-3 – is the total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate);
· U-4 – is the total unemployed plus discouraged workers, as a percent of the civilian labor force;
· U-5 – is the total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force; and
· U-6 – total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons – meaning they would like to work more hours, but don’t have the opportunity to – as a percent of the civilian labor force plus all marginally attached workers.
At the state and national level, using these definitions significantly increases the “unemployment” number. On average, the U-6 measurement adds roughly 3/4ths to the unemployment rate. The December, 2009 unemployment rate was 17.5%.
So using the U-6 definition of unemployment in Tulare County – unemployed, discouraged workers, marginally attached workers, and underemployed – gives us a rough estimate of 30-31% unemployed and underemployed. Translated, that means more than 50,000 people in the County can’t find work, whether they’ve been looking or not, or are working less than they would like.
People who track unemployment numbers often see that seasonally adjusted data is different from the non-seasonally adjusted numbers. The reason why economists and statisticians place importance on this calculation is because it balances out the information from year to year, which is a much better gauge of employment trends than measuring month-to-month.
For example, we all know that retail businesses add jobs during December, so measuring jobs from November to December is always going to show an increase in jobs. But, if we look at the November-December trend from year to year, we can see if businesses may have added more jobs in one year relative to other years.
Using this method, we can see that Tulare County retailers actually added fewer jobs in 2009 than they had in previous years. Not really good news, but we know 2009 was rough year for businesses and jobseekers.
The WIB is confident that 2010 will be a better year, though not much. The recovery will be long and slow, but using our ARRA funding, we can help those unemployed to use this time to broaden their job skills. When the economy is ready to rebound, Tulare County will have a ready workforce.
