Nowhere To Go But Down

“Is the Real Unemployment rate 16.5%, 22%, or …?” That’s what Raghavan Mayur has been asking. He’s the president at TechnoMetrica Market Intelligence, and he follows the unemployment situation very closely. So when his survey for May revealed that 28% of the 1,000-odd households surveyed reported that at least one member was looking for a full-time job, he saw some confusing differences.

“Our numbers are always very accurate, so I was surprised at the discrepancy with the government’s numbers,” said Mayur, whose firms owns the TIPP polling unit, a polling partner for “Investors’ Business Daily” and for the “Christian Science Monitor”. In a story by Pallavi Gogoi, we are reminded that headlines are showing the U.S. unemployment rate today at 9.5%, with a total of 14.6 million jobless people, but Mayur’s polls continued to find much higher figures.

The June poll turned up 27.8% of households with at least one member unemployed and looking for a job, while the latest poll conducted in the second week of July showed 28.6% in that situation. That translates to an unemployment rate of over 22% says Mayur, who began to question the accuracy of the Labor Department’s jobless numbers.

Mr. Mayur isn’t the only one with such doubts, nor is he the first to note the inaccuracies. For years, many economists have pointed to evidence that the government data undercounts the unemployed. Economist Helen Ginsburg, co-founder of “National Jobs For All Coalition” and John Williams of the Newsletter “Shadow Government Statistics” have been questioning these numbers for years.

In fact, Austan Goolsbee wrote in a 2003 New York Times piece titled “The Unemployment Myth”, that the government had “cooked the books” by not correctly counting all the people that should be counted, thereby keeping the unemployment rate artificially low. At the time, Goolsbee was a professor at the University of Chicago, but when asked whether he still believes the government undercounts unemployment, Goolsbee, who is now part of the White House Council of Economic Advisors, “wasn’t available for comment,” according to a White House spokeswoman.

Such fudging of unemployment numbers can be an enormously dangerous exercise today, writes Gogoi. It could lead some of our inept lawmakers to underestimate the gravity of the labor market’s problems and base their policymaking on a far-less grim picture than actually exists. Economically and socially that would make a bad situation much worse in this country.

“The implication of such undercounting is that policymakers aren’t going to be thinking as big as they should be,” says Ginsburg, who is also professor emeritus of economics at Brooklyn College. “It also means that consumer demand is not going to be there, because the income from people who are employed isn’t going to be there.”

This further reduction in demand will add even greater stress to an already strained economy. Businesses that were inclined to ramp up after seeing the fudged jobless numbers drop would be hurt when customers don’t appear or when orders don’t flow in.

Along with those drawbacks, having a job today is quite different from what it was just a few years ago. Those Americans lucky enough to have jobs have had their hours cut and are working for less pay. A Pew Research survey revealed that more than half of those “lucky” ones in the labor force had either lost a job or suffered a reduction in income because of the recession.

Ginsburg said that the biggest undercounting is seen among people who can’t find full-time jobs in their field of specialization, such as recent college graduates who take part-time jobs at fast-food joints or in retail stores. Today the Labor Department estimates that 8.6 million people are in this category but it’s safe to assume that the actual figure is a lot higher than the one given. The federal government counts such people as employed, but polls show that these folks actually consider themselves to be in the ranks of the unemployed job-seekers.

Another source of undercounting is the unemployed who’ve become discouraged and have given up looking for jobs. Number counts from The Bureau of Labor Statistics show only people who have actively looked for a job in the previous four weeks, even though about 2.6 million people who had actively but unsuccessfully sought jobs in the past 12 months had stopped looking.

“Isn’t it interesting that if you stopped looking for a job, you evaporate as a jobless person and are just not counted,” observes Gerald Celente, director of Trends Research Institute in Kingston, NY. Celente believes this kind of undercounting has suited the government politically. “It’s what government does: Downplay disasters and amplify success,” he said.

To be sure, if all of the truly unemployed were counted, the rate would be significantly higher and the public would see it as an unmitigated disaster. The Bureau of Labor Statistics, however, in a data work-up titled “UI-6”, showed the total unemployment rate in June at only 16.5% . John Williams of “Shadow Government Statistics”, however, says that when accounting for the long-term unemployed, today’s jobless rate runs up to as much as 22%. His newsletter, which analyzes flaws in government economic data, points out that such a rate isn’t far from the 25% it hit during the Great Depression.

Both Ginsburg and Celente believe lawmakers’ lackadaisical view of unemployment is one reason why they hesitate to extend federal unemployment benefits. Ginsburg says the Administration’s emphasis on health care reform instead of job creation reflects its lack of priority. Of course, party politics is another detriment, but the real reason for shunning our unemployment problems is that no one in authority has even a vague idea of how to clean up the mess. It was so much simpler to blow smoke about what turned out to be meaningless health care reform.

It’s obvious that some Americans view joblessness more urgently than the well-heeled politicians do, but unless pollsters like Mayur or economists like Ginsburg and Celente can find a way to get through to the headline-reading majority – which Will Rogers had already fingered – it will take a lot longer to pull out of the death spiral that Washington has been unwilling to acknowledge.

But our tailspinning, jobless economy has to be dealt with. The ideal venue for greedy politicians is a fat, dumb and happy electorate, but a fat, dumb and hungry electorate will be more than they’ll be able to handle when the desperate among them finally see the proximity of the spinning ground.