The official unemployment rate in the United States, according to the Department of Labor, is 9.5 percent, which equates to an estimated 14.6 million individuals that are unemployed. But Pallavi Gogoi, writing for Daily Finance, reports that TechnoMetrica Market Intelligence (TMI), a company that monitors unemployment data, believes that the true unemployed — and underemployed — rate is far higher — over three times higher. According to data gathered by TMI, the actual rate of unemployment in the United States stands at 28.6 percent. How could the numbers be so far apart? And if they’re accurate, what does this mean for the unemployed and unemployment benefits extensions?
An Unemployment Rate of 28.6%… Really?
First, it must be noted that the 9.5 percent unemployment rate reported by the Department of Labor and used by policy makers, does not reflect the true number of underemployed, the part-time workers (many of whom consider themselves “unemployed”), or the disheartened (those who no longer look for work). The Department of Labor does monitor these individuals as well, releasing the numbers in their U-6 data report, which places the unemployment rate at 16.5 percent.
Raghavan Mayur, president at TechnoMetrica Market Intelligence, says that he found the disparity in the numbers surprising. TMI found the May rate at 28 percent, while the Department of Labor reported 9.7 percent. And when the Department of Labor revealed a lowered figure for June (9.5%), TMI did also (27.8%).
“Our numbers are always very accurate,” Mayur said, “so I was surprised at the discrepancy with the government’s numbers.” TMI owns TIPP, which is a polling partner for Investors’ Business Daily and Christian Science Monitor.
But TMI’s July survey of 1,000 random households with at least one person seeking employment reflects a marked increase to 28.6 percent. TMI’s survey does not discriminate between who might be looking for a job (which could be individuals who are part-time employed, temporary workers, or underemployed), or discount individuals who are underemployed or part-time or temporarily employed (who are considered “employed” by the Department of Labor and only considered in ancillary data reports).
Translated into numbers, the TMI figures puts the number of unemployed, underemployed, part-time, temporary, and others entering the American Labor force at over 40 million individuals.
Does this mean that the government intentionally “cooks the books” or underplays the severity of unemployment? Although the numbers truly are higher in the U-1 through U-6 Labor Underutilization data reports, they are not reports that the Department of Labor or policymakers use in their speeches or in their estimates for appropriations bills.
What Does A 28.6% Unemployment Rate Mean, As Opposed to a 16.5% or a 9.5% Rate?
To the individual person who is searching for employment, the unemployment rate means little except as a depressing reminder that they are part of an enormous multitude who can’t find meaningful employment that can satisfy their way of life. It also means that there is increased competition for any job that is and might become available. But the most serious impact that the unemployment rate numbers have on the individual is in the way the government sees the issue and reacts to it.
At present, there are several pieces of legislation that have been introduced in Congress for the extension of emergency unemployment benefits. For one reason or another, those bills have been stalled or stonewalled. For millions of Americans who have been experiencing long-term unemployment (the worst long-term unemployment rates since the Department of Labor began tracking employment statistics in 1948), the extensions — a four-part Tier system — have become a lifeline. With the economy tanking and sluggishly attempting to resurrect itself, a process that many economists believe will take at least another year or more, and the number of jobs reflecting a downturned economy, the number of unemployed continues to grow. The number of unemployed that were eligible for unemployment benefits (dubbed “99ers” because of the longest benefits cycle of any state only allows a maximum of 99 weeks of unemployment benefits), and now are not, has also continued to grow.
Unemployment Benefits Extensions, 99ers, And Politics
At present and stretching back through the past two years, there has been no legislation regarding the 99ers or any type of financial safety net for those that become ineligible for unemployment benefits who were once eligible. This equates to millions of people over the past two years of recession. The 99ers — many of whom are actually 27ers and 47ers, etc., who never reached Tier II, III, or IV — are simply individuals experiencing long-term joblessness the same way they became jobless: through no fault of their own. Some have organized and attempted to initiate legislation that would create a Tier V unemployment extension. Thus far, they have been unsuccessful.
The unemployment extension bills that are in the Senate at present are all designed to end in November, which means that the process that Republican senators have filibustered for two months could begin again, not only throwing individual lives into chaos by suspending the tenuous lifeline that the benefits most often represent but also causing the economy to rebound far more slowly, perhaps even causing the recession to worsen by depriving the unemployed monies with which individuals pay for basic necessities.
Washington seems hellbent on playing politics while the economy continues to remain stagnant or moving in a marginally upward direction. Republicans claim importance of not adding to the national debt and a pay-as-you-go policy. However, Democrats point out the hypocrisy of the Republicans, whose profligate spending (adding over $5 trillion to the national debt) and deregulatory policies during the fourteen years they controlled Congress helped create the economic mess that the nation is experiencing. They also point out that Pay/Go has exceptions, which the Republicans well know, and one of those exceptions is emergency spending (such as war appropriations and unemployment benefits). Until this benefits extension deadline, Congress — the Senate in particular — had never not passed an extension as an automatic matter of course, a process that has continued since the 1950s.
Republicans also point to the Democrats denying their version of the bills to even get to the Senate floor for a vote. This is a common complaint of the party not currently in power (the dominant party sets the schedules). They noted that a bill that did not increase the national deficit and paid for unemployment benefits and other provisions, introduced by Senator John Thune (R-SD), had been objected to by Democrats. What they do not say is that Thune’s bill gutted all taxes (mostly corporate, hedge fund, and income taxes on those making over $250,000) from the bill proposed by the Democrats, denying the fact that the Bush tax cuts, along with the mortgage and housing crises and two foreign wars, did nothing to replenish the Treasury’s coffers while spending took place at an exorbitant rate.
So What Is The True Unemployment Rate And How Does It Affect Policy?
Not having the right numbers can cause problems. Just like a mathematical equation that has been fed factors that does not reflect the problem it is trying to solve, the government seems to have numbers reflecting unemployment that does not highlight the true magnitude of the economic problem facing the nation. It becomes difficult to solve the problem of a downturned economy when the factors being used in solving said problem are inaccurate or insufficient in showing the true scope of what is and what is needed. And when political ideologies and jockeying for political position are added into the mix, which seems to be happening in Washington, the problem can sometimes become worse.
Pallavi Gogoi’s report also points to a 22 percent unemployment rate measured by John Williams, founder of the Shadow Government Statistics newsletter, which tracks flaws in government unemployment data. Williams notes that 22 percent is not far from the 25 percent unemployment rate that is estimated to have existed during the Great Depression.
It should go without saying that TMI’s last three unemployment calculations reflects numbers exceeding the Great Depression.
Disturbing as the numbers might be, it has not gone unnoticed by most that the true numbers are worse than are being reported by the government, by politicians, and by various agencies. Even Jon Stewart on the “Daily Show” has made jokes about how the disheartened and those not looking for employment are simply not counted in the Department of Labor’s official estimate. But underestimating parts of a problem can cause the overarching problem to become far worse.
And this could be where the government, in assuming that their numbers — the worst case scenario, according to the Bureau of Labor Statistcis being 10.6 percent — are close to correct, could make an egregious error and, instead of helping curtail the economic downturn, contribute to it.
There is talk in Washington that the latest emergency unemployment extensions bill will be the last. After the next elections, where Republicans, who have done everything they can to keep the unemployment numbers high in an election year (with plausible deniability, of course), are predicted to win back enough Senate seats to number in the majority (52), the chances that another emergency extension will be voted on is probably close to nil. Chances of a Tier V or 99er extension bill (or one that would include both, which would be more likely) is almost completely out of the question.
And going forward, the economy might quickly start going backward.
Another Great Depression indeed…
So, again, how important are those numbers? Again, to the individual looking for employment, it would seem like they are not that important at all. And on an individual level, with the constant worries of day-to-day living, they are just numbers. But when taken as an accumulative effect, the numbers and what they represent can have dire consequences, especially for the national economy and its ability to crawl back out of the Great Recession.
Especially when politicians unknowingly, knowingly, and/or uncaringly underestimate the scope of their bills and measures because of “official” numbers.