Skewed Unemployment Rate

Define the Problem: The real national unemployment rate is higher than the U. S. Department of Labor’s December figure shows. When the underemployed and discouraged are added to the unemployment numbers, the national unemployed rate rises to 16. 6%. This causes morale to be low and Americans seem to be giving up. Variables Identified by Order of Influence: 1. The government no longer counts people as unemployed when they stop looking for work. The unemployment numbers don’t account for part-time workers or people seeking advanced degrees to improve their chances of landing a higher paying job. 2. More jobs were reported created than were really actually reported. Problem Statement: Unemployment fell by almost half a percentage point in December, dropping the national unemployment rate to 9. 4%, according to figures released by the Bureau of Labor Statistics on Friday, January 7, 2011. Unemployment has been high but relatively stable throughout 2010, ranging from 9. 5 to 9. 9%. December’s figure of 9. 4% is the lowest unemployment rate for all of 2010. The official unemployment index, based on a monthly survey of sample households, counts only people who reported looking for work in the past four weeks. The national unemployment rate wrapped up 2010 by significantly dropping to 9. 4 percent in December, the lowest level in 19 months despite a constant 9 percent unemployment rate for 20 months in a row, a new post-World War II record. There are two main reasons for the skewed unemployment numbers. The first key reason for the drop was that the government no longer counts people as unemployed when they stop looking for work. It doesn't account for part-time workers who want to work more hours but can't, given the tight job market. And it doesn't include those who have given up trying to find work. The second reason is that more jobs were reported that were grossed. Meaning jobs were posted but never existed and thus lowered the actual job openings lowering the unemployment rate. It's bad enough that the nation's jobless rate is 9. 4%. But the real national employment rate is even higher than the U. S. Department of Labor's December figure shows. The truth is that even the broader measure of unemployment doesn't fully capture how difficult the job market is for U. S. workers. It doesn't include self-employed workers whose incomes have shriveled. It doesn't look at former full-time employees who have accepted short-term contracts, without benefits, and at a fraction of their former salaries. And it doesn't count the many would-be workers who are going back to school, taking on more debt, in hopes that advanced degrees will improve their chances of landing jobs. The purpose of this report is to discover and offer a solution; if for no other reason, to provide a better education on how the U. S. Department of Labor manipulates the actual employment rate. Definition of Terms BLS- Bureau of Labor Statistics Corporate Outsourcing- Creation of jobs overseas by American businesses. Literature Review Many researchers have studied statistics of unemployment, available jobs, and causes related to the influx of unemployment in recent years. The following resources were very interesting and useful for my research. (IStockAnaylais. com, New Haven Register) This source discusses the issues regarding job growth over the last 2 years. Wall Street views this report as that the job expectations fell short of everyone’s expectations and the unemployment rate was likely skewed by seasonal factors. Public jobs grew at a steady rate but the government slashed many jobs due to congressional mandates set at an earlier time period. Work hours were also mentioned throughout my research of this article. Shorter work weeks having many worthy job seekers and economists scared and with the decline work hours many are starting to stay in panic mode. This article touched many key points regarding the number unemployed as well as the averages associated with the overall hours worked in a normal work week. (Newsday. om) Provide me with handy research data. I found this article to be instrumental for my research. This article covered the overall drop in the unemployment rate and it’s significant in ones respect because a falling unemployment rate during the job market recovery has often just reflected a rise in the number of discouraged workers – those unemployed people who have given up looking for a job and thus aren't included in the unemployment rate. Economist cautioned no t to expect too much too fast and to stay upbeat. The article also mentioned the difference between the recessions, stating this period was different because of the low amount of work hours involved. According to the article many Americans were involuntary forced to work part-time and counted as employed. Factor in these involuntarily underemployed workers plus the burgeoning number of discouraged job seekers, and California's real unemployment rate is 20%. Many people have been unemployed for lengthy periods of time and have giving up all hope. These people were also not reported in the overall national unemployment rate. EmployeeIssues. com) reported the unemployment rate does not include workers who are involuntarily working only part time and with fewer benefits, if any, such as no health, disability or life insurance, because they can’t find full-time jobs or their work hours were cut. The article went into detail regarding how much the average part-times wages were and how people were unable to maintain adequate healthc are coverage for their immediate families. The article went on to say the unemployment rate also does not include â€Å"marginally-attached† unemployed workers. The BLS does not count them in the official rate because they stopped looking for work, for reasons such as school attendance, family matters or their collective perception that there simply are no jobs. With the average person collecting unemployment for 26 weeks the article countered that by giving numbers more in the 33 week range for collecting benefits. There were many factors involved with work hours and other limiting issues covered within this article which supported my research. (Examineer. com) contained valuable information vital to my research. Some major issues were discussed within this article to include one final example of the disconnect between government reporting and the reality of the situation comes in the world of Unemployment Insurance. In many states across the union, unemployment benefits have been extended to unprecedented lengths. In Michigan, one could maintain their benefits for more than two years depending upon their circumstance. However, normal unemployment benefits are granted in intervals of 26 weeks for those who held the same position for one year. Here is the denominator to this equation. Anyone who has been collecting unemployment benefits for more than 26 weeks will not be counted among the unemployed. Thus, those who are still receiving state benefits in their 27th week are considered ‘out of the labor force' or 'employed'. Summary The issue that comes to the forefront of the debate on the reality of unemployment in the United States is that of honesty in government disclosures, the ability to skew statistics to create false optimism among the populace and the overall contradiction of cumulative job losses against a declining rate of unemployment. To understand this fully, one must understand how the government classifies citizens in their surveying as well as the political implications associated with this monthly report. There are millions of people out there without jobs, who have exhausted their benefits, who are simply not being counted. The above resources will help me determine the actual cause and how it will impact the struggling economy’s advancement towards a manageable workforce and improved lifestyle. Report the Findings Many researchers have studied statistics of unemployment, available jobs, and causes related to the influx of unemployment in the recent years. The following resources were very interesting and useful for my research. The Labor Department's statistics don't include the underemployed and those who have stopped looking for work. This alternative measure creates a much higher number. The federal government uses metric analysis to determine unemployment numbers each month, and sometimes per week. However, those metrics are skewed by political anomalies put in to try to make the numbers fit the agenda. For example, the nefarious birth/death rate assumptions which have no true basis for statistics, but in reality keep the numbers low to form a more positive or less negative outlook on unemployment. According to (Newsday. com) the overall drop in the unemployment rate was significant in one respect because a falling unemployment rate during the job market recovery has often just reflected a rise in the number of discouraged workers – those unemployed people who have given up looking for a job and thus aren't included in the unemployment rate. But this was not the case so much in December 2010. We're on a growth path,† said Ken Goldstein, economist for The Conference Board, a Manhattan business research group. But he cautioned not to expect too much, too fast. â€Å"It has gone up a lot because a lot of people have been put on short hours,† said economist Gary Burtless, a senior fellow at the Brookings Institution, a nonprofit public policy organization. â€Å"And there are a lot of discouraged workers. † Shortened work hours are, in fact, one of the ways this recession is different from the ones in the early 1980s and early 1990s, Burtless said. Another difference is the huge number of people who have been permanently laid off. â€Å"Some people have lost their income altogether, and others have seen a drop in hours even if they remain employed,† Burtless said. â€Å"It was a double whammy for labor income. † The two trends are especially apparent in California, where the official unemployment rate is 12. 6%. Severe layoffs in early 2009 wiped out 100,000 jobs a month, according to Michael S. Bernick, a research fellow at the Milken Institute and a former head of California's labor department. The number of people working less than 35 hours a week has exploded. The recession has left 1. 5 million Californians involuntarily working part time, though they are classified as employed. Factor in these involuntarily underemployed workers plus the burgeoning number of discouraged job seekers, and California's real unemployment rate is 20%. Another difference in this recession — and a likely reason for the high number of discouraged job seekers — is the number of people who have been unemployed for more than 27 weeks. The Wall Street Journal) reports that 7 million Americans have been looking for work for 27 weeks or more, and the majority of them — 4. 7 million — have been out of work for a year or more. California, the number out of work more than 27 weeks is almost 900,000, more than the population of San Francisco. â€Å"That largely reflects how more severe this recession has been than of 1982 and of the 1990s,† said Bernick, who has worked in the job-training field since the late 1970s. Now, although severe layoffs are no longer occurring, hiring has not picked up significantly, the labor market is still very, very slow,† Bernick said. â€Å"Each job (opening) brings tens, usually hundreds, of applicants. † According to (EmployeeIssues. com) â€Å"The unemployment rate does not include workers who are involuntarily working only part time and with fewer benefits, if any, such as no health, disability or life insurance, because they can’t find full-time jobs or their work hours were cut. Counting part-timers and full-timers, the average workweek in December was unchanged from November at 4. 3 hours. Average hourly earnings increased by 3 cents to $22. 78. † The unemployment rate also does not include â€Å"marginally-attached† unemployed workers. The BLS does not count them in the official rate because they stopped looking for work, for reasons such as school attendance, family matters or their collective perception that there simply are no jobs. The number of involuntarily part-timers was around 8. 9 million in December, down from about 9. 1 a year earlier. The number of marginally-attached unemployed workers was a little over 2. 6 million, up from about 2. million in December 2009. Among the marginally-attached, about 1. 3 million were so-called â€Å"discouraged workers† who gave up looking for work due to their shared perception that there are no jobs, about the same as in November but up by about 389,000 from a year ago. The BLS counted a total of about 14. 5 million workers as unemployed in December, down by 556,000 from November and thus, why the unemployment rate dropped from 9. 8 to 9. 4 percent. The average period of unemployment was 34. 2 weeks, up from 33. 9 in November and 29. 3 a year ago. The number of long-term unemployed workers, those who have been unemployed for 27 weeks or longer, increased from about 6. 3 to 6. 4 million in December, accounting for 44. 3 percent of the unemployed workers that the BLS counted as such. State unemployment benefits typically last only 26 weeks without state or federal extensions. The job growth, while encouraging, did not match economists' expectation that the nation would have added 150,000 to 200,000 jobs last month. Hopes were high, especially after payroll and staffing firm ADP reported earlier this week the economy added 279,000 last month. We underperformed a bit on the job front,† Donald Klepper-Smith, chief economist at Data Core Partners in New Haven, said of the government report. Job figures and the unemployment rate come from surveys of businesses and households. â€Å"The numbers which carry more weight are the job numbers, by far,† Klepper-Smith said. â€Å"It's all about jobs, jobs, jobs. † The une mployment rate, meanwhile, likely was skewed by seasonal factors in December, he said, since â€Å"there is no good justification fundamentally for a four-tenths-of-a-point decline. According to the (Examiner. com) one final example of the disconnect between government reporting and the reality of the situation comes in the world of Unemployment Insurance. In many states across the union, unemployment benefits have been extended to unprecedented lengths. In Michigan, one could maintain their benefits for more than two years depending upon their circumstance. However, normal unemployment benefits are granted in intervals of 26 weeks for those who held the same position for one year. Here is the denominator to this equation. Anyone who has been collecting unemployment benefits for more than 26 weeks will not be counted among the unemployed. Thus, those who are still receiving state benefits in their 27th week are considered ‘out of the labor force' or 'employed'. Explanation of Findings What these findings paint is an unrealistic picture, continuing claims and the jobless rate help provide a snapshot of the overall condition of employment. While the jobless rate can, over time, somewhat track the more prominent unemployment rate found in the monthly labor report produced by the BLS, it has its flaws. The Labor Department provides the following explanation: â€Å"Some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed. † That is, they're not counted as unemployed, but likely would be in the BLS report. Therefore, fluctuations in the jobless rate might not necessarily be reflective of what the trend in the unemployment rate will look like in the monthly labor report. Initial claims data are used to detect emerging employment trends. Outsized gains garner attention because they suggest looming employment weakness, which could spread to the rest of the economy. Outsized decreases imply impending employment strength. This data series is volatile. Extreme weather conditions create commensurate extremes in the data. This can happen for two reasons: either weather conditions prevented people from filing, or it temporarily or permanently put them out of work. Seasonal adjustments sometimes do an inadequate job of capturing seasonal changes. It can take several weeks for the data to be considered representative of what's really going on in the economy. The unemployment rate is calculated as (# of unemployed people)/ (# of unemployed + # of employed people) as calculated by the surveys run by the Bureau of Labor Statistics (assuming you're in the US, most developed countries have similar statistical bureaus that run similar surveys). I haven't checked what the BLS definition is, but in Australia unemployed means that you were actively seeking work or were waiting to start work – the idea being that this excludes people who are unable to work, or retired, or otherwise wouldn't get jobs even if there were jobs to get. In that sense, the unemployment rate has nothing to do with how many jobs there are out there to lose. However, the movement in the unemployment rate could certainly reduce not because the economy is improving but because it can't get any worse. Also, there's some argument over the definition of â€Å"employed†, since international convention allows for anyone who worked at least one hour to count as employed, meaning that people with part-time or casual jobs with very few hours would be able to work more hours if they were available may be â€Å"underemployed† (which is not measured in the unemployment rate). Recommendation for Change There are millions of people out there without jobs, who have exhausted their benefits, who are simply not being counted so the government can look like heroes. I suggest all people who have exhausted benefits write their congressman so they can be counted. If the people don't speak up, then nothing will be done. Nothing is getting better. There are no jobs (unless you are in the health care field), and the economy still stinks. A simple solution would be for the state to continue having people who are unemployed to claim weeks online even after benefits are exhausted. This would require a simple upgrade to the state's already-existing database, to include ineligible claimants as well. If all states did the same, a true jobless figure could be attained, and the seriousness of the problem would be brought to light. Corporate outsourcings of American jobs are what have hurt our country's financial infrastructure, nothing else. If we don't stop them now, it may not be our country anymore in the future. The people need to wake up and start writing. Don't believe the drivel they feed us every day!