Are government unemployment numbers a “big lie”?

Summary: Today we look at an example of a recurring myth on the Right, that nothing the government does can be trusted. It’s part of their long and highly successful program to delegitimatize our government (and unions too). These are the major institutions through which we can collectively resist the power of the 1%; without them we’re powerless atoms. Now the CEO of Gallup pitches dust in our eyes. {1st of 2 posts today}

A hot story on the Right about about a sad number: “The Big Lie: 5.6% Unemployment” by Jim Clifton (CEO of Gallup), 3 February 2015. It’s a disgraceful article for a CEO of a major company — and ironical for the CEO of Gallup. Red emphasis added. Excerpt:

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.

There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

… There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.

Much of this is misleading, more seriously than anything he accuses the government of doing. There is no one true definition of economic concepts such as “unemployment” and  “inflation”. These are abstractions — simplifications of reality used to aid understanding and analysis — not reality. “The map is not the territory. The name is not the actual object.”

The Bureau of Labor Statistics (BLS) tracks six definitions of unemployment from the narrowest (U-1 at 2.7% Seasonally Adjusted in January) to the broadest (U-6 at 11.3% SA). The “official” definition is U-3 (5.7%). None is more correct than the others; everyone picks the metric they prefer.

Clifton could object to use of the U-3. He gives sound reasons why we should use one of the broader measures. That doesn’t mean that the official U-3 is “a big lie”. Do we get to call Gallup’s numbers “lies” if we disagree with their definitions?

Compare the Gallup and BLS numbers

Here is Gallup’s data for January; here is the BLS report.  When calculating unemployment Gallup uses as the denominator the population over 18 years old. For U-1 to U-3 BLS uses the civilian non-institutionalized labor force age 16+; for U-4 to U-6 BLS uses broader definitions. Gallup’s are not seasonally adjusted (NSA).

The Gallup definition of unemployment corresponds roughly to the BLS U-5 NSA number: “Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

• Gallup: 7.1%.  BLS 7.4%.

The Gallup definition of underemployed corresponds roughly to the BLS U-6 NSA number: “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

• Gallup: 15.8%. BLS: 12.0%.

Both Gallup and BLS show similar steep declines. Gallup’s unemployment number dropped from 10.9% in January 2010 to 7.1% in January (-35%). The closest comparable BLS metric (U-5 NSA) declined from 12.0% in January 2010 to 7.4% in January (-38%).

Which is more accurate? The Gallup survey is 30,000 people. Its accuracy suffers from the increasing number of people using mobile phones or refusing to do surveys (see this about the problems with their 2012 election surveys). The BLS Household Survey is twice the size (60,000), with an elaborate process to ensure accuracy (see details here; see their work to compensate for rising non-response bias).

For More Information

A few posts about these things:

1. Arousing fears about inflation through inaccurate numbers: ShadowStats.
2. Undercutting people’s trust in the Republic: another step to destroying the Republic.
3. The jobs report shows the beating heart of the economy. See the good news, & the bad.