Plain Dealer, December 18, 2009, Friday

Copyright 2009 Plain Dealer Publishing Co.
All Rights Reserved
Plain Dealer (Cleveland, OH)

December 18, 2009, Friday


HEADLINE: As unemployment rises, debate rages over accuracy of official jobless rate

BYLINE: Olivera Perkins, Plain Dealer Reporter

BODY:
John Schoeb may not show up in the official unemployment rate even though he hasn't held a full-time job since he was laid off as an accountant in June 2008.

It has to do with how the government calculates the official unemployment rate. In order to make it into this jobless rate, an unemployed person must be able to answer "yes" to three questions: Are you without work? Are you available for work? Have you actively looked for work?

As unemployment has risen, debate about whether the official rate is accurate has raged from support groups for laid-off workers to academic circles. Criticism will flare again today when the state announces the latest rate for Ohio.

Deciding on a better way isn't clear-cut, however.

Despite common misperceptions, the jobless figure isn't based on unemployment claims, but the Current Population Survey, completed by 60,000 households nationally. The Labor Department releases weekly reports about unemployment claims. Both the monthly federal and Ohio unemployment rate reports also include the number of jobs the economy has shed or gained.

Among the questions on the household survey are those asking if any family member meets the official unemployment conditions.

"For people who are unemployed, there is a both a factual matter - they don't have a job - and a judgmental matter: How attached do they feel to the labor force and the activity of finding a job?" said John Abowd, professor of industrial and labor relations at Cornell University and an expert on labor market statistics.

"The survey attempts to quantify that degree of attachment and alienation in a sequence of questions that were designed to distinguish between people who aren't employed in a job and aren't in any way actively seeking a job, but perhaps engaged in some other equally meaningful activity like going to school."

Alternative rates offer broader look at jobless

For Schoeb of North Ridgeville, the answers to those questions change frequently. Sometimes he gets temporary accountant's work. During soccer season in late summer and early fall, he often works as a referee. Sometimes he has to take a brief break from networking, combing Web sites for job postings and sending out resumes.

"You kind of exhaust everything after awhile," Schoeb said. "It is just doing the same things over and over again. Seeing the same job postings, going to the same meetings and talking to the same people who didn't have any more advice than they did last week."

All of these answers would exclude Schoeb from the official unemployment rate - the widely reported monthly fig-ure often used as a gauge of the economy's health. Living on a fraction of what he made before being laid off, and still collecting jobless benefits, Schoeb considers himself very much unemployed.

While Schoeb some months may not qualify for the official unemployment rate, he could show up in one of the five alternative jobless rates the federal government releases monthly. With the exception of two, these alternative rates offer broader definitions of unemployment compared with the official rate. The more inclusive rates include measures such as "discouraged workers," or those who have suspended job searches because they believe positions aren't available, and people who are working part time, but want a full-time job.

Analyst: Jobless rate really more than 31%

The broadest rate, which the federal Labor Department's Bureau of Labor Statistics calls U-6, also includes "mar-ginally attached workers," those who want to work but aren't looking for reasons other than being discouraged.

When the broadest rate is used, the unemployment rate swells. For example, November's official U.S. unemploy-ment rate, which the Labor Department calls U-3, was 10 percent. The U-6 was 17.2 percent.

The department releases state data only in quarterly averages, and the latest such data for Ohio mirror the national trend. The average official unemployment rate in Ohio from October 2008 through September 2009 was 9.2 percent. The U-6 rate was 16.1 percent.

So does the broader measure give a more accurate reading of unemployment?

Yes, says John Russo, co-director of the Center for Working-Class Studies and coordinator of the Labor Studies Program at Youngstown State University's Williamson College of Business Administration. His gripe is that the measure should be even broader. He has come up with something he calls the de-facto unemployment rate.

By Russo's calculations, the current unemployment rate is really more than 31 percent. In addition to U-6 measures, it takes into account such factors as increases in early retirement, the prison population and government programs for low-income people.

"You have to look at people who are out of the labor market for other reasons," he said. "Maybe they are in the military because there are no jobs. We know that there is an increase in a lot of government aid because people have lost their jobs. If you talk to prison reform people, they will tell you there are a lot people who are in prison who wouldn't be in prison if it were not for the recession."

Different rates, but they tell same story

Russo said it is not a question of whether the official rate or the more inclusive rates are more accurate. "It is a question of what do we infer about the general state of the economy from different measures of the state of the labor market."

Hirschel Kasper, an economics professor at Oberlin College, agrees.

"They do measure different things, but they do move in the same direction roughly at the same time," he said. "When you look at the changes from one period to the next, they tell the same story."

"I like to think of unemployment statistical data like a thermometer," Kasper said. "Is it going up or is it going down? Is public policy having any effect?"

Russo said he agrees - up to a point.

"That makes a lot of sense, if you assume we are in a typical business cycle, but what if we're not?" he asked.

Russo said he bases this assumption in part on what occurred in Youngstown in the early 1980s, the last time Ohio and the United States experienced consistent double digit unemployment. Ohio's official unemployment rate peaked at 13.8 percent in January 1983. The U.S. rate peaked at 10.8 in December 1982.

A Youngstown State study at the time showed that the local jobless rate was considerably higher than what gov-ernment statistics actually showed, Russo said.

George Zeller, an economic research analyst in Cleveland, said finding the real unemployment rate isn't a debate worth having because the jobless rate is unreliable - especially at the state and local levels. The national survey doesn't include enough Ohioans, Zeller said.

Instead he likes to focus on the job loss figures.

"We've lost 14 percent of the jobs in Cuyahoga County since 2000," he said. "To say that the jobless rate is 10 per-cent is misleading."

Also, Zeller said the definition and interpretation of the official unemployment rate periodically changes, making it difficult to even compare jobless figures from the early 1980s with current ones.

"Both Democratic and Republican administrations have changed the unemployment definition to make the official number look lower," he said - although the Obama administration has not revised the definition.

No matter how close statistics come to revealing the real rate of unemployment, they can't reveal the anguished stories of laid-off workers who have been unable to find full-time employment.

Joseph Wollet of Strongsville was laid off in August 2008 as a project manager. He is part of The Plain Dealer's Help Wanted series, which is following dozens of unemployed Northeast Ohioans as they seek work.

In April, Wollet got a contract consulting assignment that was supposed to last several months, but it ended after a few weeks because the company declared bankruptcy. Since then, he has been working as a part-time sales consultant, earning about 20 percent of what he made working full time.

"The challenge is to keep myself busy and off the unemployment rolls, yet still have money to pay all the bills," he said.

Keith Seide II of Aurora was laid off as an information technology director two years ago. Since then, he has worked primarily on a contract basis.

"I would still consider myself as someone who would want to be a salaried, W-2 employee," he said.

Seide said he can't find a job as an IT director, despite even having applied overseas. He recently started AnyKey IT Solutions LLC, hoping that the entrepreneurial venture will help restore what he used to make.

While the experts debate the real unemployment rate, Seide has his own definition:

"When I reach the point of making the same or more of what I made as a salaried employee, I'll consider myself successfully employed."

Computer Assisted Reporting Editor Rich Exner contributed to this story. To reach this Plain Dealer reporter: oper-kins@plaind.com, 216-999-4868
BOX
Calculated rates
A look at Ohio's average unemployment rate from October 2008 through September 2009 shows how the jobless rate changes based on measures are used:
4.3%: Ohio's labor force unemployed for at least 15 weeks.
9.2%: The official unemployment rate, which the federal government calls U-3. Based on the number of people looking for work.
9.6%: When discouraged workers are added.
10.6%: Including unemployed, discouraged and those who want work but aren't looking for reasons other than be-ing discouraged.
16.1%: The broadest measure of unemployment, including people who are working parttime for economic reasons. Known as U-6.
Ohio ranks 14th in the country for the traditional unemployment rate and 13th for this last measure.
SOURCE: U.S. Bureau of Labor Statistics

LOAD-DATE: December 19, 2009