Thursday, October 31, 2013

There's more than meets the eye in unemployment statistics...but you probably knew that already

The United States Labor Department reported today that first-time unemployment claims dropped by 10,000 last week to "just" 340,000. Here's how Market Watch reported the story.

On the face of it, that is a good thing. Fewer people asked for help from the government because they lost work.

But, as the linked report points out, this doesn't really say much about how many people got jobs during the week. However, they do claim that the report gives a good gauge of layoffs, how many people are being put out of work. I'm not so sure that is true.

The thing is, you have to be eligible for unemployment benefits to receive them. Just applying does not mean that the individual will receive them. And maybe some people who aren't eligible go ahead and apply, although I'm not sure why they would. Unemployment might be a huge bureaucracy, but it's really difficult to fall through the cracks in a manner that will give benefits to a person who does not qualify for them. I assume that most people who know they aren't eligible take the road I did and don't even bother to apply. It really is a lot of paperwork to do for nothing.

And, a lot of people aren't eligible. In my state, eligibility requirements include:

Having received enough pay in the base period
Being unemployed through no fault of one's own
Be actively looking for work
Be physically able to work
Be available to go to work immediately

These are not all the requirements, but they are the ones that are most tricky. There is another not on the list, which is the one that tripped me up: The applicant has to have been employed by someone else. In other words, if you were self-employed, you aren't eligible for benefits.

To review - you have to have made a certain amount of money in the "base period", which changes based on when the individual applies for benefits. If you didn't make that much during the period, tough luck. You can't have just up and quit your job because you don't like it. You have to be willing and able to work, immediately - that means no going out of town to visit relatives for a few days and not being so sick that you can't go to work. And you have to be actively looking for a job - and you have to document that. Just saying, "Yeah, I've been looking" won't cut it with the Employment Development Department.

So, what this means in regards to layoffs is that the number of people applying for benefits doesn't equal the number of people who lost jobs during the week in question. So, last week, while 340,000 people applied for unemployment benefits in the US last week, it's certain that more than 340,000 people lost jobs during that week.

The reported figure for new jobless claims, which is always the one that is reported, also doesn't say anything about how many people are receiving benefits on an ongoing basis. This category is called "continuing claims", and is usually reported far down in the story, if it is reported at all. In the week ending October 19, the last week for which this number is known, 2.88 million people continued to get unemployment benefits. In other words, nearly 3 million people who have been out of work for a while still did not find jobs. Or, at least that many, because the labor department doesn't even track those who remain unemployed who are not getting benefits.

I've written about this problem here before, in relation to how the unemployment rate is figured. Basically, if you aren't looking for a job, the government doesn't consider you unemployed. It also doesn't count people who are underemployed, or working part time but want to be working full time. I won't belabor that point here, but it's important to keep that in mind: the unemployment rate is always higher than the figures in the official reports.

The point is, the government reports the rosiest numbers possible regarding who isn't working.

In August 2013 in Fresno County, California, according to the Bureau of Labor Statistics information) I'm using, for example, the latest month for which data is available, the official unemployment rate was reported at 11.9 percent. This is much better than the 15 percent to 16 percent the rate was running at for a while, but still not the real number, which is widely considered to remain above 15 percent, possibly substantially above that level.

Certainly, I'm not saying that anyone is cooking the books in regards to how unemployment statistics are gathered and reported. This has been the way these numbers have been figured for as long as I can remember. What I am saying is that it is important to look beyond the headline numbers to the whole picture and to realize that things are not as rosy in regards to how many people are working - and how many people cannot find work - in the United States.

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