Invisible Face of the Long Term Unemployed

There is a website called ShadowStats.com published by John Williams which criticizes government methodology in processing economic data, particularly in regard to the unemployment rate which, ostensibly, is grossly understated.  Such a mission is automatically open to skepticism: What is the agenda here?  Is the reporter an anti-government crank or conspiracy theorist?  I think in this case that such a perfunctory dismissal is undeserved.  The posted unemployment rate, whether at a national or regional level, is hugely misunderstood and therefore, hugely misleading.

On the face of it, the idea of an unemployment rate is relatively simple.  A rate or percentage is a fractional part of some “whole thing” expressed as a decimal fraction (part of a hundred - %).  The “whole thing” of the unemployment rate is only that part of the population that is available – ready, willing, and able to work.  That’s the population that is actively working or actively looking for work.  They are called the Total Civilian Labor Force. The fractional part of that “whole thing” is the group of actively-searching potential workers who are currently unsuccessful at finding a job. They are Unemployed. 

Here are some counter-examples:  a 38-year old, stay-at-home mom with a PhD in immunology who resigned her $100,000/yr job 4 months ago is not unemployed.  She is unavailable and not counted.  A homeless veteran who fights PTSD every day, refuses benefits and services, and lives off his route of trash cans and dumpsters is identically not unemployed.  If you are below the radar, you are not unemployed.

There is a vast army of people who are not working and who are not in the same boat. “Discouraged workers” want desperately to have a job but they have stopped looking.  The profile and circumstances are unique for each individual.  What they have in common is that they fit the usual criteria for being unemployed but they are under the radar and they are not counted. They are not in the “whole thing” of the available labor force; they are not part of the posted percentage rate.  Discouraged workers render the official unemployment rate a poor reflector  – not only the state of the economy – but of the plight and prospects of millions trying to participate and provide for themselves or their families. 

An unemployment number that includes all the people who would go to work this afternoon if you offered them a job will range between 13% and 24%.  The difference depends on how alarmist or conspiratorial you want to be.  The Bureau of Labor Statistics number, U6, is  “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.”  For July 2013 that number (seasonally adjusted) is 14% - down from 14.9 in July 2012.  John Williams of ShadowStats, after some massaging of the data, comes up with a rate of 23.3% for June 2013.

Especially if you are one of the “marginally attached”, the argument of which number is right is totally irrelevant.  Objectively it is a true statement that both numbers are at Depression levels.  I guess it’s also irrelevant that a more inclusive unemployment rate report was discontinued in 1994.

There are a handful of gloomy clouds that darken the horizon for the long-term unemployed.  Two them have been mentioned here before – globalization and technology.  Globalization means that labor costs are cheaper somewhere else and that’s where a lot of the jobs go.  Technology provides state-of-the-art workplace solutions that make workers in living-wage jobs obsolete – even jobs that traditionally weren’t touched by robots: think accounting, the postal service, numerous middle-management functions or a full range of face-to-face or voice-to-voice personal services.

Possibly worse than either of these two is an employer bias against hiring someone who has been out of a job for more than six months.  The conventional wisdom is that “the longer a worker is unemployed, the more difficult it may become to find a job” because “over time, people who are unemployed tend to lose human capital and attachment to networks that could help them find work.”  (Apparently human capital means workplace skills.)  Whether or not this is revealed truth (and it may not be) it is an exceptionally high barrier for a hobbled job-seeker to jump over.

Recession is a technical term that refers to at least two consecutive quarters of a shrinking GDP.  So the recession (with a small “r”) ended in 2009.  Corporate profits are way up, especially because of diminished labor costs.  A few people are doing very, very well.  This is cold comfort for somewhere between a tenth to a quarter of the American workforce.