Question

Given the nature of unemployment and unemployment calculations, every election year the conversation of how we measure unemployment is brought forth in debate. Traditionally, the incumbent will often lean on the official unemployment rate (i.e. the U3 rate) to discuss the state of the economy and the challenger will often attack this number stating that actual unemployment is really much higher and our official number doesn’t tell the whole story. Can you explain this distinction and why it is important?

Answer 1

Why does the government collect statistics on the unemployed?

When workers are unemployed, they, their families, and the country as a whole lose. Workers and their families lose wages, and the country loses the goods or services that could have been produced. In addition, the purchasing power of these workers is lost, which can lead to unemployment for yet other workers. Addressing the issue of unemployment requires information about the extent and nature of the problem. How many people are unemployed? How did they become unemployed? How long have they been unemployed? Are their numbers growing or declining? Are they men or women? Are they young or old? Are they White, or Black, or Asian, or of Hispanic ethnicity? How much education do they have? Are they concentrated in one area of the country more than another? These statistics—together with other economic data—can be used by policymakers to determine whether measures should be taken to influence the future course of the economy or to aid those affected by joblessness.

What is the difference between official and actual unemployment?

Both the unemployment rate and the number of unemployed are staggeringly high, and both understate the toll coronavirus is taking on the economy. The actual percentage and total are much higher. The official unemployment rate is the percentage of the labor force that is without a job.

What are the basic concepts of employment and unemployment?

The basic concepts involved in identifying the employed and unemployed are quite simple:

 People with jobs are employed.

 People who are jobless, looking for a job, and available for work are unemployed.

 The labor force is made up of the employed and the unemployed.

Who is counted as employed?

People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:

 On vacation

 Ill  Experiencing child care problems

 On maternity or paternity leave

 Taking care of some other family or personal obligation

 Involved in a labor dispute

 Prevented from working by bad weather

These people are counted among the employed and tabulated separately as with a job but not at work, because they have a specific job to which they will return.

Who is counted as unemployed?

People are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:

 Contacting: o An employer directly or having a job interview o A public or private employment agency o Friends or relatives o A school or university employment center

 Submitting resumes or filling out applications

 Placing or answering job advertisements

 Checking union or professional registers

 Some other means of active job search

Passive methods of job search do not have the potential to connect job seekers with potential employers and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet. Workers expecting to be recalled from temporary layoff are counted as unemployed whether or not they have engaged in a specific job seeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).

How is unemployment measured for states and local areas?

The Local Area Unemployment Statistics (LAUS) program publishes monthly estimates of employment and unemployment for approximately 7,300 areas, including all states, counties, metropolitan areas, and cities of 25,000 population or more, by place of residence. These estimates are key indicators of current local economic conditions. BLS is responsible for the concepts, definitions, technical procedures, validation, and publication of the estimates that state government agencies prepare under agreement with BLS. Labor force data from the LAUS program follow the same Current Population Survey (CPS) concepts and definitions used for the national labor force data. Because the CPS survey of 60,000 households nationwide is insufficient for creating reliable monthly estimates for statewide and substate areas, LAUS uses three different estimating procedures, each being the most appropriate for the level of geography being estimated. In general, estimates for the states are developed using statistical models that incorporate current and historical data from the CPS, the Current Employment Statistics (CES) program, and regular state unemployment insurance (UI) systems. These model-based state estimates are also controlled in "real time" to sum to the not seasonally adjusted national monthly CPS totals. Model-based estimates are also developed for seven large substate areas and their respective balances of state.

Estimates for the substate labor market areas are produced through a building-block approach known as the "Handbook method." This procedure also uses data from several sources, including the CPS, the CES program and the Quarterly Census of Employment and Wages (QCEW) program where CES estimates are not available, state UI systems, and the decennial census, to create estimates that are adjusted to the statewide measures of employment and unemployment. Below the labor market area level, estimates are created for counties, cities, and towns above 25,000 population using disaggregation techniques based on inputs from the decennial census, annual population estimates, and current UI data. Unlike the LAUS state and substate labor force estimates, which have multiple sources of inputs and are available on a monthly basis, the demographic labor force data from the Geographical Profile of Employment and Unemployment (GP) bulletins, also published by LAUS, are derived solely from the CPS and are issued annually. These demographic data are available for the Census regions/divisions, all 50 states and the District of Columbia, and certain large metropolitan areas and cities.